18 May 2022 07:27, UTC
Reading time: ~2 m
Due to the collapse of Terra, serious problems arose with Tether (USDT). The outflow of funds from Tether over the past few days has increased and reached an average of at least $ 1 billion per day. Investors and traders cashed out at least seven billion dollars from the Tether stablecoin and its market cap is down nearly 8% over the past week and continues to decline.
The amounts withdrawn from Tether in recent days have exceeded $ 10 billion, which is equivalent to the capitalization of the stablecoin before the start of this market cycle in May 2020. So, on May 11, the capitalization of USDT updated its historical maximum at around 84.151 billion dollars. But over the past 7 days, Tether’s market capitalization has decreased by almost 10 billion, to $ 74.307 billion.
Recall that to support tether’s peg to the US dollar, the company additionally supports it with cash, bonds, treasury bills to provide each token with assets worth at least $ 1.
As the company’s latest report shows, the general sum assets amounted to approximately 78 billion dollars and of which almost 5 percent were cash.
A few days ago, due to the market panic, the USDT/USD pair traded below the $0.99 mark on leading venues and representatives of the company had to make a special statement. It said that all its obligations would be fulfilled.
However, a number of investors were quick to exchange Tether for USDC, as this asset was verified and fully backed by both Treasury bonds and cash.
What’s next with Tether?
Will its capitalization continue to fall? At the moment, the dynamics is such that capitalization is really decreasing, although not at a catastrophic pace. There are a lot of predictions about the future fate of stablecoins now, and they often contradict each other. The general situation is so uncertain that it is possible to develop any, the most negative scenarios.
Given the fact that Tether has repeatedly been complained about the transparency of reports, and even lawsuits have been filed against it, any negative news can bring down the asset. Plus the lack of transparency of the collateral. And then its capitalization can drop to almost zero. What in this case will be on the market, it is easy to imagine. Confidence in stablecoins can be completely undermined by investors.
Author: Vadim Gruzdev, Analyst at Freedman Club Crypto News
#Tether #USDT #awaits #fate #Terra