USDT investors have withdrawn over $10bn in the past two weeks.
TerraUSD collapse catalyst for stablecoin decline.
Tether (USDT) broke below its mark, dropping to about 95 cents earlier this month.
LAGOS (CoinChapter.com) — Tether, the world’s largest stablecoin by market cap, has witnessed an outflow of $10 billion in the last two weeks.
USDT market cap in the past 30 days. Source: CoinMarketCap
The massive withdrawals occurred after TerraUSD (UST), the native stablecoin of the Terra (LUNA) blockchain ecosystem — lost its peg with the U.S. dollar earlier this May. That impacted Tether, possibly due to its bad track record proving that each of its issued USDT is 100% backed by cash or cash-equivalent reserves.
Notably, Tether’s USDT circulating supply plunged from $84.2 billion on May 11 to around $73.3 billion on May 25.
Additionally, it’s worth noting that the number of Tether’s USDT in circulation has been down 6.51% in the past year. However, several experts have backed the ability of stablecoin, assuring that, unlike TerraUSD, USDT would not collapse.
Stephen Aschettino, Head of FinTech at Norton Rose Fulbright, noted that stablecoins should not be abandoned because of TerrraUSD failure. He said:
“While we have witnessed an erosion in investor confidence, we should not throw all stablecoins out the window.”
USDC, BUSD Record Growth
Although the panic over TerraUSD has drawn negative attention to stablecoins, USD Coin (USDC) and Binance USD (BUSD) have recorded significant growth this month.
Increasingly, USDC’s circulating supply, according to the recent Arcane Research report, has surged by 26% year-to-date. On the other hand, BUSD’s circulating supply was also up by 28% in the last year.
Stablecoin performances year-to-date. Source: Arcane Research
Additionally, its worth noting that these stablecoins saw smaller peg deviations following UST and LUNA collapse. For example, BUSD and USDC dropped a few cents, and USDT dipped as low as 95 cents on May 12.
Notably, Tether’s USDT strong reserve makes it a more reliable stablecoin. USDT is currently backed by holdings in the U.S. Treasuries and cash and bank deposits.
Unlike Tether, UST wasn’t backed by fiat currency held in reserve. Instead, it relied on some complex engineering where price stability was maintained through the destruction and creation of UST and LUNA.
Experts Predict Bright Future For Tether USDT, Other Stablecoins
Meanwhile, despite the massive decline in the circulating supply of the world’s largest stablecoin, experts have noted that Tether’s USDT and other projects would survive.
Bitcoin and USDT are the top reliable reserve assets for the crypto space. There is a reminder every few years. Everyone is starting to slowly understand this.
Gabor Gurbacs, crypto director at VanEck, said Bitcoin and USDT are the most reliable reserve assets in the crypto space. Similarly, Brad Yasar, CEO of EQIFI, noted that he doesn’t believe the stablecoin market will suffer. Yasar said:
“The asset-backed stablecoins — as long as their reserves match the number of coins in circulation — are not prone to de-pegging by market movements.”
Mark Basa, director at HOKK Finance, argued that stablecoins are the entry point for crypto adopters. As a result, they will continue to be relevant.
Tether, in a statement, also assured investors of the legitimacy of the stablecoin. The company further emphasized that USDT was backed one-to-one by dollars and could withstand any turbulence.
“It has maintained its peg because every USDT is redeemable for dollars via Tether, and as such any time the price goes below $1 investors can earn a profit by buying USDT for a discount and redeeming it with Tether.”
Daniel Abel is an experienced journalist and crypto enthusiast. He has been covering the blockchain and crypto industry since 2018 and believes digital currency is the future.
The cryptocurrency market seems to be in recovery, with Bitcoin prices moving above $21,000 on Jun 21 after jumping...
Our Partners
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.