It is a known fact that the crypto space is now in the middle of a notable bear market which is yet to find its bottom. The star crypto, Bitcoin, currently appears struggling to restore the last line of defence above $20,000. In such a case, the crypto market tumbles down heavily and at the same time, the stablecoins possess extreme strength. Mainly due to the fact that traders just swap their crypto assets into stablecoin and wait until the market recovers to get back in.
Ever since the algorithmic stablecoin TerraClassicUSD (USTC) lost its peg heavily, traders now are more cautious about the stablecoins as well. Two events, currently point out that the bear market, now in 2022, will largely impact stablecoins as well.
Also Read: How Long Will Bitcoin (BTC) & Ethereum (ETH) Prices May Hold $20,000 & $1000 Levels?
Tether (USDT) Loses 20% of its Market Cap in a Month
The most popular stablecoin, Tether (USDT) which gained strength in the second half of 2020 appears to have trembled heavily in the past month. Due to the USTC de-peg, traders also had dumped USDT falling into a FUD. However, the platform had burnt 3 billion USDT to stabalize the peg. No doubt the stablecoin has maintained its peg till now, but the depleting market cap does appear to stabalize since then.
The bear market in crypto, combined with all the other news around big players like Terra (LUNA), Celsius Network and 3AC collapsing(potentially) has compelled the traders to exit their positions. Moreover, external factors like inflation, FED rate hikes, Global war, etc are pushing the people to not only get out of cryptos but also exit USDT for fiat. However, until and unless USDT maintains its peg it may not reach the fate of UST.
UST 2.0 on the Horizon, USDD & USDN Crash Hard
The breakdown of the algorithmic stablecoin backed by a volatile asset has ignited a wave of FUD among the other stablecoins as well. Similar to USTC, Tron-based algorithmic stablecoin USDD had lost its peg to hit $0.95 levels while its backed asset TRX also continued to dip. No doubt the platform quickly influx some liquidity which helped the stablecoin recover a little to trade at $0.97 at the press time.
On the other hand, Neutrino USD (USDN) which is a crypto-collateralized stablecoin pegged to the US Dollar also crashed hard at the same time. However, the stablecoin is still struggling very hard to regain its value as after hitting bottoms at $0.916, the asset is still trading at $0.94.
Collectively, the bear market is primed to impact all the crypto assets in the market and stablecoins are no exception. Traders exiting their positions due to external pressure could continue as the broader markets also appear in strenuous positions.
Also Read: Decoding the Possibility of USDD Dropping More, How Tron DAO Is Set To Protect
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Source: https://coinpedia.org/news/is-ust-2-0-on-the-horizon-usdd-usdn-usdt-face-major-hurdle/