{"id":27388,"date":"2022-11-11T12:22:20","date_gmt":"2022-11-11T06:52:20","guid":{"rendered":"https:\/\/coinswitch.co\/switch\/?p=27388"},"modified":"2022-11-11T15:22:21","modified_gmt":"2022-11-11T09:52:21","slug":"tether-loses-dollar-peg-briefly","status":"publish","type":"post","link":"https:\/\/coinswitch.co\/switch\/news\/tether-loses-dollar-peg-briefly\/","title":{"rendered":"FTX fallout: Tether loses dollar peg briefly"},"content":{"rendered":"<p>Tether (USDT), the largest stablecoin by market cap, lost its dollar peg last night, albeit briefly. The stablecoin dropped as low as 93 cents on certain exchanges when it is mandated to maintain the $1 peg. However, it was a short-lived scare as Tether quickly came back to parity with the US dollar. At press time, USDT is trading at $0.99, with the peg status intact.<\/p>\n<p>With TerraUSD (UST)-triggered market crash in May still remaining fresh in investors\u2019 minds, it is quite natural that even a short depegging instance becomes the talking point of the crypto world. And it wasn\u2019t just USDT that depegged. Decentralized USD or USDD\u2014an overcollateralized and algorithmic stablecoin\u2014couldn\u2019t maintain its peg on 10 November 2022 and dropped to a low of $0.96\u2014amid the <a href=\"https:\/\/coinswitch.co\/switch\/crypto\/everything-you-need-to-know-about-the-ftx-binance-saga\/\">FTX-Alameda crisis<\/a>.<\/p>\n<h2>What triggered the depegging of stablecoins?<\/h2>\n<p>It is speculated that Alameda Research started borrowing USDT on the DeFi protocol AAVE, using USDC as collateral. Eventually, they started dumping or aggressively selling the borrowed USDT on the Curve DEX. This approach created FUD (Fear, Uncertainty, and Doubt) in the market and eventually lowered the liquidity associated with the 3Pool\u2014the largest LP (Liquidity Pool) related to the Curve DEX.<\/p>\n<p>The FUD started spreading, and people started dumping their USDT, a usual panic response of the crypto community. All of that increased the concentration of USDT in the 3Pool, which went up to 86%. And with USDT or Tether taking up such a portion of a liquidity pool, liquidity for other assets dropped. The stablecoins list for the <a href=\"https:\/\/www.theblock.co\/post\/185295\/stablecoin-liquidity-on-curves-3pool-falls-to-lowest-level-since-luna-crash\" target=\"_blank\" rel=\"noopener\">Curve 3Pool<\/a> comprises USDT, USDC, and DAI.<\/p>\n<p>The sudden increase in the supply of Tether\u2014people swapping it for other tokens like USDC\u2014caused the peg to dwindle for a while. Data from Coinmarketcap shows the lowest price for Tether in the past 24 hours was $0.9815.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-27413 size-large\" src=\"https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2022\/11\/Screenshot-2022-11-11-at-9.22.11-AM-1024x251.png\" alt=\"stablecoin tether depeg\" width=\"800\" height=\"196\" srcset=\"https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2022\/11\/Screenshot-2022-11-11-at-9.22.11-AM-1024x251.png 1024w, https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2022\/11\/Screenshot-2022-11-11-at-9.22.11-AM-300x73.png 300w, https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2022\/11\/Screenshot-2022-11-11-at-9.22.11-AM-768x188.png 768w, https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2022\/11\/Screenshot-2022-11-11-at-9.22.11-AM-1536x376.png 1536w, https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2022\/11\/Screenshot-2022-11-11-at-9.22.11-AM.png 2026w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>Even while the prices were close to the depeg region, Paolo Ardoino, CTO at Tether, mentioned yesterday that the firm had already processed about $700 million in USDT redemptions without facing any issue.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\"><a href=\"https:\/\/twitter.com\/hashtag\/tether?src=hash&amp;ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noopener\">#tether<\/a> processed ~700M redemptions in last 24h.<br \/>No issues.<br \/>We keep going.<\/p>\n<p>&mdash; Paolo Ardoino \ud83c\udf50 (@paoloardoino) <a href=\"https:\/\/twitter.com\/paoloardoino\/status\/1590671674378067968?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noopener\">November 10, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>More direct reasons were behind USDD\u2019s brief depeg. It is believed that Alameda dumped USDD in droves to stay afloat. Here is a tweet by Justin Sun \u2014 Founder of Tron, which talks about the same:<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">I think probably Alemeda just sold their USDD to cover the liquidity of ftx exchange. The pool currently is back with a healthy rate. \ud83d\ude0e <a href=\"https:\/\/t.co\/oSIzUNqE0Z\">pic.twitter.com\/oSIzUNqE0Z<\/a><\/p>\n<p>&mdash; H.E. Justin Sun\ud83c\udf1e\ud83c\uddec\ud83c\udde9\ud83c\udde9\ud83c\uddf2\ud83d\udd25 (@justinsuntron) <a href=\"https:\/\/twitter.com\/justinsuntron\/status\/1590359606416789504?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noopener\">November 9, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<h2>USDD may not be out of the woods yet<\/h2>\n<p>USDD is a Tron-based hybrid stablecoin that is currently trading at $0.978, down 0.08% from its peg. This hybrid\/ algorithmic stablecoin on the stablecoins list went as low as $0.9669 in the last 24 hours, giving off some serious scares.<\/p>\n<p>However, USDD doesn\u2019t seem to be out of the woods just now. Here is why:<\/p>\n<p>While USDD is no more just an algorithmic stablecoin and is sufficiently backed by reserves in TRX, Bitcoin, and USDC\u2014a majority of the collateral is earning staking rewards at the moment. Besides, almost 99% of the Tron token (TRX) collateral is illiquid, courtesy of a governance contract. When it comes to readily usable collateral, Tron DAO only has $236 million worth of BTC and $600 million in USDC to show for.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tether (USDT), the largest stablecoin by market cap, lost its dollar peg last night, albeit briefly. The stablecoin dropped as low as 93 cents on certain exchanges when it is mandated to maintain the $1 peg. However, it was a short-lived scare as Tether quickly came back to parity with the US dollar. At press [&hellip;]<\/p>\n","protected":false},"author":76,"featured_media":27389,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_ayudawp_aiss_exclude":false,"footnotes":""},"categories":[7701],"tags":[6467,6536],"class_list":["post-27388","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-crypto","tag-news"],"acf":{"json_ld_schema":"\n[{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"@id\":\"https:\/\/coinswitch.co\/switch\/us-stocks\/wall-street-jottings\/#FAQPage\",\"headline\":\"Wall Street jottings: A personal, guided tour to investing in US stocks\",\"keywords\":\"Personal Guide, US Investing, \",\"datePublished\":\"2022-07-22T13:28:55+05:30\",\"dateModified\":\"2022-09-19T19:04:28+05:30\",\"dateCreated\":\"2022-07-22T13:28:55+05:30\",\"author\":{\"@type\":\"Person\",\"name\":\"Ananda Banerjee\",\"description\":\"Ananda Banerjee is a creative copywriter at heart, a technical writer by profession, and a multifarious Web 3.0 creator in his leisure time. 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