Tether lost its peg, resulting in a large sell-off of USDT on Curve and Uniswap, leading to a suggestion to switch to other stablecoins.
The stablecoin USDT, created by Tether, has lost its value of one US dollar after two major pools for trading stablecoins became heavily imbalanced.
On-chain data shows that traders have exchanged millions of dollars worth of USDT for other popular stablecoins, such as USDC and DAI, on Uniswap and Curve pools.
On Thursday, the USDT balance on Curve’s popular 3pool, which is a stablecoin swapping pool composed of USDT, USDC, and DAI, rose to over 70%, indicating that traders had exchanged tens of millions of USDT for USDC and DAI.
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The ideal balance of the Curve 3Pool should be 33.33% for each of the three stablecoins: USDT, USDC, and DAI.
However, the imbalance has resulted in a significantly higher USDT balance on Curve’s 3pool compared to other stablecoins. Currently, the pool holds over $300 million of USDT and nearly $55 million each of DAI and USDC.
USDT Loses Peg as Selling Pressure Intensifies
The selling pressure has also caused USDT to deviate from its intended value of $1.
At the time of publication, USDT is trading at $0.996788, down by 0.4% over the past day, according to data by CoinGecko.
In a recent tweet, Tether CTO Paolo Ardoino stated that markets “are edgy these days, so it’s easy for attackers to capitalize on this general sentiment.”
“But at Tether, we’re always ready. Let them come. We’re ready to redeem any amount.”
It is worth noting that this is not the first time Curve 3Pool has become imbalanced.
Back in March, the pool became imbalanced when USDC and DAI’s ratio increased to over 45% each.
It also became imbalanced in November last year when the crypto exchange FTX collapsed.
A similar imbalance was also observed after the Terra ecosystem’s crash in May 2022, which saw USDT become volatile and temporarily lose its value.
Historically, there have been controversies surrounding Tether, with many questioning the claims that it has enough reserves to justify its one-to-one peg claim, as well as the quality of assets making up those reserves.
USDT Recoups Lost Market Cap
The recent selling pressure on USDT comes days after the largest stablecoin in the market reached a new record high market capitalization, exceeding $83.2 billion.
The stablecoin managed to recover the $20 billion it had lost in market value following the collapse of rival stablecoin TerraUSD last year.
While Tether has managed to recover the market value it lost last year, other stablecoins have not been as successful.
For instance, USDC, the second-largest stablecoin, currently has a market cap of around $29 billion, far less than its all-time high record of over $56 billion, according to data by CoinGecko.
Data by Glassnode further shows that USDT currently commands a market share of more than 65%. Other major stablecoins, including USDC, BUSD, and DAI each command a market share of around 24%, 5%, and 4%, respectively.
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