Tether [USDT]: Whales and what a new 3‑year low means for the stablecoin

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The cur­rent state of the cryp­tocur­ren­cy mar­ket can be best described with the help of falling domi­noes. First, it was the col­lapse of the algo­rith­mic sta­ble­coin Ter­raUSD [UST], sow­ing tur­bu­lence in the broad­er mar­ket. Then its the grown-up cousin Teth­er [USDT] that wavered from the peg, fuel­ing con­cerns over its sta­tus as a place to hide dur­ing times of tur­bu­lence. While things appear to be set­tling down for the moment, nobody’s feel­ing safe. More specif­i­cal­ly, Teth­er, cer­tain­ly isn’t.

Prepare for a rough ride

Teth­er, the world’s largest sta­ble­coin, broke below its $1 peg amid pan­ic in the cryp­to mar­ket. Even at press time, the sta­ble­coin stood at the $0.999 mark.

There are grow­ing con­cerns about whether Teth­er actu­al­ly had enough assets to back up its intend­ed $1 peg. Teth­er, the com­pa­ny of the same name, pre­vi­ous­ly claimed that all its tokens remain backed one-to-one by dol­lars held in a reserve.

How­ev­er, after a set­tle­ment with the New York Attor­ney Gen­er­al, it was revealed that Teth­er relied on a range of oth­er assets. This includ­ed com­mer­cial paper, a form of short-term, unse­cured debt, to back its token. Teth­er has since reduced the amount of com­mer­cial paper in its reserves and says it plans to low­er its hold­ings fur­ther over time.

Did it work? Well, no, as the token stands far from it…

Address­es hold­ing $100k to $10 mil­lion in cryp­to‘s largest sta­ble­coin neared three-year lows, in terms of sup­ply held. In fact, Teth­er whales now hold the low­est per­cent­age of the stablecoin’s sup­ply since August 2019. 

Source: San­ti­ment

Is there a pos­si­bil­i­ty of this sce­nario chang­ing? Well, yes. San­ti­ment, in a 7 July tweet added:

How­ev­er, the short time frame paints a grim sce­nario for the flag­ship sta­ble­coin. One rea­son is, Tether’s clos­est rival, Circle’s USD Coin (USDC), might be the one mak­ing headlines.

USDC is the most-used sta­ble­coin of all when it comes to trans­fer­ring vol­ume, hold­ing a share of 51.6% on this front. Teth­er and DAI only have shares of 23.8% and 12.9%, respectively.

Source: Dune Analytics

In fact, two weeks ago, the USDC sta­ble­coin crossed Tether’s USDT by the num­ber of dai­ly trans­ac­tions on the Ethereum blockchain.

Going from worse to the worst?

Just as things weren’t look­ing too good for Teth­er, now, even coun­tries began crack­ing on the net­work. For instance, Beijing’s Chaoyang Dis­trict People’s Court has ruled that sta­ble­coins such as USDT can­not be used for salary pay­ments, the local news agency Bei­jing Dai­ly report­ed on 6 July.

Is this game over for USDT? Sure looks like.

 

 

 



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