It has been a rough week for crypto, but it has been an even rougher week for stablecoins. Tether (USDT), the stablecoin mainstay of the crypto space, snapped as low as $0.95 in the early hours of May 12 amidst wider market fears surrounding TerraUSD (UST).
Earlier in the week, UST depegged from its intended $1 mark to as low as $0.29. In a desperate bid to restore UST’s price, Terraform Labs have been printing and selling millions of its stabilising token, LUNA, causing it to drastically devalue by 99.95 percent over the past seven days.
Tether has a notably larger sway over the cryptocurrency market than TerraUSD, being the third largest coin after Bitcoin and Ethereum as well as a vital tool to the functioning of all exchanges.
If Tether depegged for more than a few hours, it could spell serious troubles for the market. However, unlike TerraUSD’s algorithmic approach, Tether is backed one to one with the US dollar, making it – in theory – more resistant.
Following the sharp drop, Tether recuperated back up to $0.98 within the hour and steadily climbed back up to $0.99 by noon.
At the first sight of slippage, Tether CTO Paolo Ardoino jumped on Twitter to ease holders’ nerves.
Tether also shared a video interview with Ardoino to clear up the difference between algorithmic stablecoins like UST and centralised stablecoins like USDT.
In the current climate of stablecoin fear, the similar names of UST and USDT likely hasn’t been doing Tether any favours amongst amateur investors.
Stablecoins’ suffering hasn’t spared top coins a beating, however. Bitcoin is 27.75 percent in the past seven days, trading as low as $26,350, whilst Ethereum is even more bruised, being down 32 percent at $1750.
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