Lets’s talk about Tether — A summary of yesterday’s events
For those of us who have been in crypto long enough, I think we all know that this space never stays dull for too long. Today was no exception — and we had none other than USD Tether (USDT) to thank for.
The following depicts price charts for the three USD-backed stablecoins that are listed on Binance — TrueUSD, Paxos Standard and, of course, USDT. At around 1300 (UTC +8) the fireworks began. BTC seemed to begin rallying — but what accompanied thereafter was truly eye-catching.
USDT (white line) began dumping — at one point while being priced at $0.85 per USDT it was trading at ~15% below its supposed stated value (par value) of $1. Conversely, we began to see a flight to safety with TUSD (blue) and PAX (yellow), peaking at more than 20% above their $1 par values (both are now priced at a ~5% premium above par at this point of writing). Both are stablecoins with more transparency disclosures built into their value propositions.
Food for thought — had you been savvy enough to hold some of these non-USDT stablecoins prior, you would have made in a few hours gains in excess of 20%…on an asset that’s supposed to be price stable! Something truly phenomenal was brewing.
The backdrop to today’s events had been building for weeks now, beginning with rumours circulating that Noble Bank, a Puerto Rican bank which was once strongly suspected to be holding the USD funds for Tether, was on the brink of insolvency. Bitfinex, which has long been established by most to — at the very least — have a close-knit relationship with Tether, denied being negatively impacted by Noble bank’s woes. Subsequently, amid further rumours that they may have been banking with HSBC (it is unclear the extent of disclosures which the latter was provided), fiat deposits and withdrawals for many users were halted from 11th October onwards.
With many already on jitters, it didn’t take much for today’s selloff in USDT to occur, with the lack of timely updates from Bitfinex, fake news as well as the real news of OKEx listing all four major USDT stablecoin competitors at one go shortly after the selloff began, all contributing to today’s uncertainty. It remains to be seen if Bitfinex will be capable of delivering on their promise to re-enable their fiat channels by October 16th, and if so, whether user confidence in the exchange and USDT will be restored and maintained.
The only thing that is certain is that USDT’s lack of transparency has now risen to the top of minds for the whole crypto-community in a way unlike ever before.
This has gone on to heighten the demand for stablecoins that are fully-licensed, with transparently-audited fiat reserves that are secured with bank partners that are privy and aligned with the projects.
For part 2 of this article, click here.
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