Tether’s stablecoin USDT has lost its dollar peg after two major pools for stablecoin trading became heavily imbalanced.
On-chain data shows traders have been exchanging millions of dollars worth of USDT for other popular stablecoins like USDC and DAI on Uniswap and Curve pools.
On Thursday, USDT balances on Curve’s popular 3pool, a stablecoin swapping pool comprised of USDT, USDC, and DAI, rose to over 70%, suggesting traders had swapped tens of millions of USDT for USDC and DAI.
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 led to a substantially larger USDT balance on Curve’s 3pool compared to other stablecoins. As of now, 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 led to USDT distancing away from its intended peg 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 said markets “are edgy in these days, so it’s easy for attackers to capitalize on this general sentiment.”
“But at Tether we’re ready as always. 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 turn volatile and temporarily lose its peg.
Historically, there have been a lot of controversies surrounding Tether, with many questioning 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 saw its market capitalization hit a new record high, exceeding $83.2 billion.
The stablecoin managed to recover the $20 billion in market value it had lost 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 this 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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