Topline
The price of Tether, the world’s biggest stablecoin and a cornerstone of the cryptocurrency ecosystem, slipped away from its $1 peg on Thursday, intensifying worries amid a market-wide crash and plummeting cryptocurrency prices.
Tether lost its $1 peg on Thursday.
Key Facts
Tether’s USDT—a stablecoin that is supposed to be tied to the U.S. dollar one-for-one—fell as low as 94 cents early on Thursday, according to Coinbase.
The drop, around 6% below its $1 peg, comes amid a major cryptocurrency crash that has erased hundreds of billions from the market after another stablecoin, TerraUSD, completely slipped its $1 peg.
Unlike Terra—which holds its $1 peg by trading a paired token, Luna—Tether says its tokens are backed by actual currency, though the group has been criticized for its lack of transparency over its holdings and was fined $41 million by the U.S. Commodity Futures Trading Commission in 2021 for making misleading statements about its reserves.
Tether’s CTO Paolo Ardoino on Thursday said the group is honoring USDT redemptions at $1 and has managed more than 300 million in the last 24 hours “without a sweat drop.”
Key Background
Stablecoins are supposed to be a relatively safe haven in the otherwise highly volatile crypto markets. They are kept stable by being pegged to other assets—including fiat money like the dollar and tangible assets like gold—or through an algorithm. With a market capitalization of more than $80 billion, Tether is by far the world’s biggest stablecoin and the third-largest cryptocurrency overall. It occupies a central role in the digital market and is used as to complete other transactions and store value.
What To Watch For
Regulation. Global regulators, including in the U.S., have identified stablecoins as an area of the cryptocurrency market in need of rules and guidance. Treasury Secretary Janet Yellen has called for a “consistent federal framework” to govern the assets, which she says are a risk to financial stability.
Further Reading
Luna Nosedives Under $2, Loses 98% Of Its Value As TerraUSD Struggles To Regain Its Dollar Peg (Forbes)
Source: https://www.forbes.com/sites/roberthart/2022/05/12/tether-untethered-worlds-biggest-stablecoin-loses-1-peg-as-crypto-market-crashes/