The crypto winter could claim more victims in the field of stablecoins. The de-pegging of TerraUSD (UST) on Tuesday triggered a sharp market decline, and now Tether (USDT) appears to be losing its footing, having fallen against the US Dollar.
The UST algorithmic stablecoin is, as the name suggests, backed by algorithms. LUNA, the native token of the ecosystem, is down more than 95% since Tuesday, while UST is still languishing around 0.50 cents.
Cointelegraph experts shared their explanations for why UST crashed in a special edition of “The Market Report” yesterday. Terraform Labs algorithmic stablecoin plan is still on track, but UST is still in the red.
Data from Cointelegraph Markets Pro confirmed that several stablecoins have shown more volatility than usual: USDT, the world’s largest stablecoin, traded below $0.99, Gemini Dollar (GUSD) broke above $1, and USD Coin (USDC) also rallied. .
Paolo Ardoino, CTO of Bitfinex and Tether, shed some light on the difference between asset-backed stablecoins and their algorithmic counterparts in a conversation with Scott Melker:
“If you want to make an algorithmic stablecoin, for example, it has to be 300% backed by solid assets, solid crypto assets – not 105%, or 110%, or even less. […] That makes no sense”.
Ardoino shared that for UST to work, triple the investment would be needed, that is, more than USD 50,000 million:
More sauce https://t.co/w51pFcLJey
– Paolo Ardoino (@paoloardoino) May 12, 2022
In previous tweets, Ardoino remembered to crypto enthusiasts that “Tether is honoring conversions from USDT to one dollar” while spreading calm throughout the industry. For crypto veterans like Whale Panda, the distinction between stablecoins is clear: Tether’s FUD (Fear, Uncertainty, and Doubt) is “peak FUD”:
people confusing $USDT and $UST and panicking.
People don’t understand the difference between an under collaterized algorithmic stablecoin and a backed stablecoin.
panic dumping $USDT for $USDC and plain old $USD.Peak fud time.
Warning: this post will attract “Tether truthers”
— WhalePanda (@WhalePanda) May 12, 2022
USDT price has recovered from its very brief drop to $0.95 this morning, but has not yet reached parity with the dollar. In the latest developments, Tether plans to move 1 billion USDT from Tron to Ethereum and Avalanche. This will not change the total supply of Tether, said the company in a tweet.
Samson Mow, CEO of Jan3 and a pioneer of hyperbitcoinization, also came to the defense of USDT:
USDt isn’t going to lose its peg. Know when players are just trying to induce panic.
— Samson Mow (@Excellion) May 12, 2022
USDT is not going to lose its peg. You have to know when players are trying to induce panic.
Nic Carter of Castle Island Ventures poked fun at the stablecoin saga, joking about a stablecoin event he will be attending:
might be a bad time… but are we still doing this next week? pic.twitter.com/JyjbpagK8a
— nic carter (@nic__carter) May 11, 2022
It may not be a good time… but is this still going next week?
USDT has rallied to within two basis points of the dollar at press time. Furthermore, an article shared by the Tether team explained that they are “on track to process $2 billion today.” Danger avoided.
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