Stablecoin USDT has lost its peg to the dollar. Why is this happening?
The largest stablecoin by market capitalization USDT from Tether came under pressure. The coin, whose exchange rate is nominally pegged to the US dollar, temporarily lost parity with it on decentralized trading platforms amid negative news for the crypto market. The leading stablecoin dipped slightly below $1 after decentralized platform Curve’s 3Pool liquidity pool was heavily out of balance. 3Pool is the third largest trading pool among all existing trading platforms (decentralized exchange, DEX) in the field of decentralized finance (DeFi) and the largest in terms of the amount of USDT and DAI stablecoins in it. At the time of publication, USDT is at $0.998, according to CoinMarketCap. Recall that Curve and Uniswap are the largest decentralized financial protocols for the exchange and trading of crypto assets, operating on the basis of software smart contracts without a central intermediary (for example, an exchange), and the liquidity pool is a smart contract containing locked tokens that were provided by users platform, and acting as an automated market maker on a decentralized exchange.
Currently, the largest liquidity pools in the Uniswap and Curve protocols are actively selling USDT. When sellers flood the market, this can cause even a “stable” asset to fall in price. A similar situation was observed during the collapse of Silicon Valley Bank (SVB), when the second-largest stablecoin, USD Coin (USDC), issued by Circle in partnership with the Coinbase exchange, lost its peg to the dollar. Then the USDC rate fell to $0.93, only a few days later restoring price parity. The USDT balance in the 3pool pool of the Curve platform, which consists of USDT, USDC and DAI stablecoins, exceeded 77% on the morning of June 15th. This means that traders are selling a lot of USDT for DAI or USDC, which causes USDT to go down. This is an abnormal event for the market. The ideal Curve 3Pool balance should be 33.33% for each of the three stablecoins. The last time 3Pool was out of balance was in March with active selling of USDC and DAI. Last November, the collapse of the FTX cryptocurrency exchange also led to a severe imbalance in the pool. This was also observed after the collapse of the Terra ecosystem in May 2022, as a result of which USDT also temporarily lost its peg to the dollar. “We are ready for anything,” wrote Tether CTO Paolo Ardoino. “Let them sell. We will cover any amount.”
Against the backdrop of the latest news about the tough actions of US regulators against the largest market players, the panic among market participants is quite understandable. However, now the loss of USDT parity with the dollar is more likely caused by the actions of specific individuals in the liquidity pools of DeFi platforms, explains the CFO of the ASTL investment project Konstantinas Sizovas — “This is not the first time this has happened, and previously this turned out to be a provocation [of market participants] making money by opening the desired position. And the manipulations in DeFi were the starting shot. Therefore, the current decoupling on centralized exchanges is only a consequence of what is happening in the order book.”
As Ardoino wrote in a comment to The Block, “The market is very tight in general right now.” According to him, recent news is pushing major players to leave the cryptocurrency markets. “Tether is a gateway for liquidity, both in and out. When interest in cryptocurrencies grows, we see an inflow; when sentiment in the cryptocurrency market is negative, we see an outflow. But a direct attack on Tether cannot be ruled out, as we have already seen in 2022,” adds Ardoino. Reinforcing what is happening with USDT with information that the Securities and Exchange Commission (SEC) may pay attention to Tether is unlikely. The company is not under US jurisdiction, and it will be extremely difficult to prove the direct interaction of US citizens with Tether LTD. Prohibit the issuance of a stablecoin (as was done with BUSD from Paxos) — too. The maximum that threatens USDT is a ban on circulation on American exchanges, Konstantinas Sizovas believes.
“It is clear that there is still a small chance that the US authorities could go to war on Tether, because there are enough questions for the company as a whole. But the SEC has already had some tension after the latest lawsuits, so getting involved in another potentially complex legal process would be rather imprudent,” the expert adds. At meetings of the US government, rhetoric was repeatedly heard in the style of “we don’t quite understand what to do with stablecoins, but we still need to do something.” According to Sizovas, aggressive actions that will actually lead to the stagnation of the industry for a long time are unlikely will meet the approval of market participants, especially against the backdrop of more loyal regulation of the cryptosphere in other states.
The most popular cryptocurrency, Bitcoin (BTC), has now plummeted from almost $30k to $25,137.80. Meanwhile, within 2 hours, BTC fell below $25k to $24,902.15. The last time at this mark, the first cryptocurrency was traded on March 16. During the day, the asset fell by 3.6%. Its market capitalization is $484 billion with a daily trading volume of $12.8 billion. The market share of BTC is 45.7%.
In addition, 92.39% of BTC out of a total supply of 21 million bitcoins is currently in circulation. Trading volume remains green, indicating participation in BTC trading with a 0.46% increase at the time of analysis. However, the market cap is expected to fall 3.22% to $487 billion. On the other hand, bitcoin miners are struggling at 2.18% defending themselves with increased hashrate. This creates huge competition among miners as the record tops 52.35 trillion. However, crypto investors rely on BTC trading despite hardships and downfalls. It is believed that the reason for the sudden drop in BTC below $25 thousand at the moment may be the announcement of the Federal Reserve (Fed) to stop raising interest rates at 5.25%. Prior to this, BTC fluctuated at the level of 26 thousand dollars.
Leading altcoins fell in price after the first cryptocurrency. Ethereum fell in price by 5.6% to $1.64 thousand, XRP (XRP) fell in price by 5.6% to $0.48, Solana (SOL) — by 1.9% to $14.81, Cardano (ADA) — by 5.5%, to $0.25. Polygon (MATIC) shed 4.4% to $0.61, Dogecoin (DOGE) shed 2.9% to $0.06 and Litecoin (LTC) shed 6.1% to $72.83. The total market capitalization of cryptocurrencies decreased by 3.7% over the day, to $1.05 trillion, the daily trading volume amounted to $41 billion. The index of fear and greed in the crypto market dropped from 46 to 41 points out of 100, going deeper and deeper into the fear zone. The indicator also updated a minimum for 3 months, the last time it was below the mark of 41 points on March 12 (33 points). During the day, 41.2 thousand positions of traders were liquidated on crypto exchanges, the total amount of liquidations was $148.2 million. According to Coinglass, 87% of orders were long. In Ethereum, positions were forcibly closed for $57 million, in bitcoin — for $41 million. In third place is XRP — $5.2 million.
Against this backdrop, investors are advised to take some time to think before making any investment. One of the legitimate forms of investment is the ASTL investment project, which allows investors to have the opportunity to directly invest fiat and cryptocurrency assets in a stable passive income that obviously exceeds inflationary expectations and is not subject to any sanctions, blocking and confiscation. The ASTL project is a simple and elegant solution for potential investors — an investment in the development of the real sector of a diversified portfolio of cryptocurrencies, with a fairly high APR (up to 14%) with payments in stablecoin (USDT) and the possibility of a full return on investment through the subsequent sale of accrued ASTL tokens on leading crypto exchanges . Details can be found at https://astl.world
