- Tether caused shockwaves in the crypto market when it de-pegged.
- Most altcoins like USDC, USDD, Tether, and Dai regained their pegs.
Cryptocurrency prices dropped sharply this week as concerns about the industry continued. Bitcoin dropped below the important support at $25,000, signaling that there are more sellers than buyers in the current environment. As a result, the Bitcoin fear and greed index crashed to the fear zone of 40 while most tokens were in the red.
Tether (USDT) regains its peg
The biggest story on Thursday was that Tether had lost its peg. The token, which is the biggest stablecoin in the world, crashed to a low of $0.9958, sending shockwaves in the entire market. This de-pegging was caused by the massive selling in the crypto market following the SEC lawsuit against Coinbase and Binance.
The sell-off happened after major dislocation in Curve Finance, a leading player in the crypto. Whales sold off their token for other stablecoins, resulting to Tether making up over 60% of Curve’s 3pool. This is a sign that they were selling USDT for other stablecoins like Circle’s USD Coin and Maker’s Dai. In a note, Tether’s CEO said:
“Markets are edgy these days, so it’s easy for attackers to capitalize on this general sentiment. But at Tether, we’re ready as always. Let them come. We’re ready to redeem any amount.”
Therefore, there are concerns about the safety of Tether and other stablecoins like Dai and USD Coin. As I wrote here, I believe that Tether is a safe and stable stablecoin, thanks to its transparency and the fact that it has survived other meltdowns in the past. It survived the FTX and Terra Luna collapse in 2022.
In all these crashes, Tether has been able to redeem its funds even when users withdraw billions of dollars every day. This is notable since Tether maintains equal reserves as the market cap.
Read more: How to buy Tether.
Are other stablecoins safe?
In addition to Tether, I believe that USD coin is also a safe stablecoin since its reserves are easy to track. However, I have concerns with USDD and Dai, which are algorithmic stablecoins. These stablecoins are not backed by fiat currencies. Instead, like Terra USD, their peg is maintained by the algorithm.
Tron’s USDD is safer because it is overcollaterized. According to Tron Scan, there are assets worth over $1.2 billion that are backing 733 million worth of USDTT. This gives it a collateral ratio of 166%, making it safer.
Dai, on the other hand, is backed by other cryptocurrencies. However, the challenge for Dai and USDD is that the Ethereum tokens that back it are relatively volatile. Therefore, I would still opt for USDC and USDT.
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