Supporters of Tether, the largest stablecoin, have ensured enough assets back the digital token. Still, despite working smoothly, it has not been enough to reassure the market.
What’s More?
A liquidity pool that enables traders to swap the three biggest stablecoins shows that Tether has an elevated supply, accounting for 65% of Friday’s total as per the CEO of Mudrex, a Platform for crypto investment. This is an indication that investors are cautious about holding Tether.
In May, the collapse of TerraUSD stablecoin led investors to become skeptical of Tether and increased scrutiny of digital assets. Wall Street Journal cited Genesis Global Trading Inc. head of institutional sales Leon Marshall for the past month for short sellers increased in Tether.
As per CoinGecko, the Market capitalization of Tether fell by $600 million last week after TerraUSD imploded to approximately $17 billion.
Oversupply of Tether
In an email to Bloomberg, a spokesperson for Tether said that the USDT is the most stable dollar-based coin and, therefore, it is not surprising that it is the most liquid and widely held stablecoin in the world. Investors use this coin for swapping with other assets.
Exchange liquidity poolCurve 3pool, where traders can swap USDC, DAI, and Tether, the share of the USDT was 29.9% on May 6, just before the dollar peg for TerraUSD deviated. On May 12, it went up to as high as 82% as a crisis or sent for TerraUSD and knocked out Tether from its peg.
The supply of Tether’s share has declined since then. It is still above the crisis level pre-TerraUSD. Some reverses have decreased since eth Journal report. The 3pool handled approximately $117 million trading volume last Friday.
Tether maintains a one-to-one peg with US Dollar with the support of dollar reserves and equivalent dollar assets. This stockpile has been repeatedly questioned though Tether files its quarterly assets return on its holding through an accounting firm based in the Cayman Islands. The asset holdings have been decreasing slowly and exposure to assets is shifting from commercial papers to liquid instruments such as Treasury Bills.
A Bloomberg report in February said that FIR Tree Capital Management was making a substantial bet on Tether, predicting it would give returns in one year.
Paolo Arduino, the Chief Technology Officer for Tether, has been using Twitter to assure investors after TerraUSD tanked repeatedly. After the story from Journal, Arduino said Tether never defaulted on redemption, cutting its exposure in the commercial paper by about $45 billion. He added that the portfolio is more robust than before.
