The world’s largest stablecoin dropped below its $1 peg as crypto carnage continues
While everybody was talking Terra Luna stablecoin, it turns out there is a bigger problem brewing in the crypto market–Tether (also known as USDT), the world’s largest stablecoin. This morning, Tether fell below its $1 peg as the collapse of Terra Luna ripples in the crypto market, causing panic among crypto investors.
Tether is a surrogate crypto dollar that is theoretically pegged at the same value as a dollar but can be traded without following regulations on dollars. Tether is one of the commonly known coins called Stablecoins, which are virtual currencies that are always supposed to have the same real-dollar value.
However, at around 3:15 a.m. EST, Tether sank to as low as 95 cents on some exchanges. Tether’s decline came after terraUSD, a different stablecoin we covered this morning, dropped 99.7% on Wednesday. The collapse led to fears of possible market contagion. LUNA tokens also lost 96% in the past 24 hours alone, pushing it to less than 10 cents. That’s down from about $60 earlier this week and a record $120 in mid-April.
Vijay Ayyar, head of international at crypto exchange Luno, told CNBC that the move by tether was likely “speculation-driven fear” resulting from the fallout of UST’s plunge. “The environment is ripe for such news events to cause ripples through the markets as we can see,” Ayyar added.
Meanwhile, earlier Thursday Tether Chief Technology Officer Paolo Ardoino took to the social media to reassure investors that their stablecoins are safe. He insisted tether holders would always receive $1 when redeeming their tokens.
In a post on Twitter, Ardoino said:
“GM Reminder that tether is honouring USDt redemptions at 1$ via http://tether.to .
>300M redeemed in last 24h without a sweat drop.”
Reminder that tether is honouring USDt redemptions at 1$ via https://t.co/fB12xESSvB .
>300M redeemed in last 24h without a sweat drop.
— Paolo Ardoino (@paoloardoino) May 12, 2022
We wrote about Tether about a year ago after The New York Attorney General’s Office said that “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.” Below is how The New York Attorney General’s Office described Bitfinex and Tether’s illegal activities:
“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General James. “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system.”
Unknown to many crypto investors, Tether or USDT is a controversial cryptocurrency founded in 2014 and controlled by the same people who founded Bitfinex, with which it shares overlapping officers. Tether is headquartered in the British Virgin Islands, Hong Kong, Isle of Man. According to its LinkedIn profile, Tether has only 13 employees with more than $60 billion under management, making it one of the biggest fintech startups out there.