Here Is The Possible Reason For USDT’s Depegging!

While the crypto market is struck between Terra, and the UST crash, Tether, the third-largest cryptocurrency and one of the most liable stablecoin globally, has raised fear among the investors due to its price drop by 5%.

The global cryptocurrency market is under extreme consolidation for a week now, with total market capitalization dropping to $1.20 trillion after a downfall of 15.75% in the past 24hrs.

At the moment, Tether (USDT) has plunged by 1.57% over the last 24hrs trading at $0.9843, the lowest level since the 2017 crypto crash.

This price action is highly unusual as the Tether (USDT) is required to maintain its peg of 1:1 against the US dollar. After TerraUDS (UST) crashed losing its dollar peg, the investors have become too cautious about de-pegging of tokens.

Reason For USDT Depegging?

USDT is one of the stablecoin that is being sold by traders for dollars so that their exposure to the crypto market is reduced. In the present crypto market, investors are withdrawing their positions from the crypto market.

It’s just not USDT, traders have also leaned towards Binance USD (BUSD) and USD Coin (USDC) suggesting a backup for USDT. Now, in the past 24hrs BUSD and USDC have surged by 1.10% and 0.63% respectively.

As the investors began to shift their focus from USDT, the founder Paolo Ardoino claimed that the token had observed $300 million redemptions to USD in the last 24hrs and this happened without a single drop in price.

Bitfinex Inability To Back USDT, The Reason For Depegging

The exchange that operated USDT, Bitfinex, has now stated that it is backing the USDT value with a massive reserve pool. According to Bitfinex data, nearly 84% of this pool is formed by cash and cash equivalents.

However, the organization is condemned for not being transparent over its reserves and this pulldown could have happened due to Bitfinex’s uncertainty of not backing the token effectively.

The investors faith in stablecoins has definitely given a second thought due to USDT’s depegging. But many are still optimistic with stablecoins.

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Source: https://coinpedia.org/news/here-is-the-possible-reason-for-usdts-depegging/