The Tether stablecoin (USDT) appears to have failed to convince investors that it can handle the massive redemptions in the market.
Data from Curve, the largest DeFi stablecoin exchange, shows that its largest liquidity pool is heavily biased towards USDT. This indicates that traders are exchanging the tokens in favor of other stablecoins – namely USDC and DAI.
65% of the so-called 3pool on Curve consists of USDT - about $650 million in tokens. The remaining 35% is split equally between USDC and DAI. At the time of writing, USDT is still trading slightly below its peg to the U.S. dollar and has been for almost two months. It also trades at a lower price than USDC and DAI.
As the crypto market plunges to its lowest levels since 2020, traders are unsure which coins will implode next.
USDT sales continue despite Tether’s assurances
Much of the scrutiny on USDT comes from the decoupling following the Terra crash. The implosion of the TerraUSD (UST) stablecoin has increased scrutiny of other coins.
Although USDT has since largely recovered from the decoupling in May, uncertainty about the nature of its reserve has dogged the token. Crypto traders have criticized Tether for not disclosing the assets backing the stablecoin.
Since May, USDT's total market capitalization has fallen by about $15 billion to $66 billion due to a series of redemptions.
This puts the coin about $10 billion away from being overtaken by USDC.
Despite Tether's repeated attempts to reassure investors of the stability of its reserves, the stablecoin's market value has fallen. A report last week suggested that more short sellers are shorting USDT.
But Tether has a stable history
However, despite the scrutiny on USDT, the stablecoin has honored all redemptions to date and has done so for over five years. Tether claims to back stablecoins with over $66 billion in assets and has weathered several crypto winters.
Recently, FTX CEO Sam Bankman-Fried stated that the uncertainty surrounding USDT is unfounded and that he is confident in the stablecoin.
Given that Tether is widely used to facilitate transactions, an implosion of Tether would have catastrophic consequences for the crypto market.
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