Stablecoin Tether (USDT) Lost Its Peg to US Dollar


The actions of one whale make Tether lose its dollar peg.

An imbalance in the Curve’s 3pool has led to minor fluctuations in the Tether (USDT) stablecoin’s pegging to the United States dollar.

On June 15th, USDT experienced a slight price drop, retailing for around 0.997, as its proportion in Curve’s 3pool exceeded its typical 33.1% to over 70%.

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Curve’s 3pool, a crucial liquidity holder in the DeFi sector, consists of the three leading stablecoins – USDT, USD Coin (USDC), and Dai (DAI). As per the data, USDT comprised 73.79% of Curve’s 3pool, while DAI and USDC held 13.05% and 13.16%, respectively.

An increase in a particular stablecoin’s weightage within this pool signals extensive selling of the asset. The rise of USDT weightage to approximately 73.8% indicates that traders are exchanging their USDT holdings for DAI or USDC.

It is not the first time such a situation occurred. In November 2022, following FTX’s collapse, USDT’s share in Curve’s 3pool went above 50%.

A primary factor behind this discrepancy was the actions of a whale address named CZSamSun, which borrowed 31.5 million USDT and swapped it for USDC, thus causing a minor deviation in USDT’s pegging to the dollar. Using 17,000 Ether (ETH) and 14,000 staked Ether (stETH) as collateral, this address converted the borrowed USDT into USDC via the 1inch Network.

This slight USDT price alteration aided the USDC/USDT trading pair on Binance to hit a new yearly high of $1.0034.

In response to concerns arising from these developments, Tether’s CTO, Paolo Ardoino, sought to reassure the crypto community via a tweet, stating that the depegging concerns are unfounded and Tether is prepared to redeem any amount.

This incident of depegging fears surrounding a stablecoin follows closely on the heels of the USDC depeg scare that rattled many investors a few months ago. USDC fell below $0.90 in March when Circle announced it had over $3 billion locked with Silicon Valley Bank.

While minor deviations in stablecoin pegging can stir market concerns, it’s essential to understand the underlying causes and reactions of the issuing entities. This instance with USDT underscores the need for constant vigilance and an informed approach in the crypto sphere.

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