USDT depeg sends shivers through traders, but its dominance sustains

• USDT’s depegging incident rattles traders with significant market impact and increased activity.
• Despite the depegging, USDT maintains dominance with the largest market cap.

As per reports and various data sources, on 15 June Tether’s USDT experienced a significant detachment from its peg. Despite the diverse range of explanations to justify this depegging event, the consequences, as evidenced by multiple metrics, remained consistently impactful.

USDT depeg spooks traders

When news of the USDT depeg broke, several crucial metrics on Santiment revealed a negative market reaction through increased activity. Santiment’s Network Realized Profit/Loss metric highlighted significant instability for the stablecoin on 15 June.

It indicated a realized loss exceeding $2 million, reflecting a surge in traders and hodlers disposing of their tokens while the asset’s market value dipped. As of this writing, the situation had improved slightly, with a realized profit of approximately $753,000.

Source: Santiment

Additionally, the supply of Tether on exchanges experienced a decline following the depeg event. It dropped below 18.7%, marking a similar dip last observed in May 2020.

The exchange flow balance also surged, surpassing 120 million, indicating heightened unease among traders. However, as of this writing, the balance has reduced to around 4 million.

Source: Santiment

USDT dominates still…

According to data from Coin Market Cap, the dominance of USDT hadn’t diminished, at least not yet, despite the recent depegging incident. As of this writing, USDT maintained its position as the stablecoin with the largest market capitalization, surpassing $83 billion.

Furthermore, its trading volume over the past 24 hours stood at over $21 billion, significantly higher than the volume of the second-ranked stablecoin, USDC, which amounted to over $3 billion.

The current market capitalization of the entire stablecoin market was approximately $128.5 billion. This highlighted the continued dominance of USDT despite its recent challenges.

What to expect?

USDT experiencing a slight dip below its peg wasn’t an unprecedented occurrence. It has been observed multiple times throughout the years since its introduction in 2017, often regarded as a minor blip.

However, the recent depegging incident garnered more attention due to the prevailing market sentiment and regulatory actions targeting certain exchanges. Moreover, the market appears to be still reeling from the FTX crash, adding to the overall unease.

The upcoming days will be crucial in shaping how Tether responds to these events, as it will significantly influence the dispersion of fear, uncertainty, and doubt (FUD) surrounding the stablecoin.