The crypto winter could be claiming more casualties among the stablecoin camp. The depegging of TerraUSD (UST) on May 10 triggered market selloffs, and now Tether (USDT) appears to be losing its footing. It has slipped against the U.S. dollar.
The algorithmic stablecoin UST, as the name implies, is algorithmically backed. Terra (LUNA), the ecosystem’s corresponding token, sank over 95% since May 10, while UST continues to languish around the $0.50 mark.
Cointelegraph’s resident experts shared their explanations for why UST crashed in a Market Report video yesterday. The plan for the TerraLabs’ algo stablecoin continues to roll out but the stablecoin is struggling.
Data from Cointelegraph Markets Pro confirmed that various stablecoins have shown greater volatility than usual. The world’s largest stablecoin, Tether USDT traded under $0.99, Gemini GUSD exceeded $1 while USD Coin (USDC) also appreciated.
Paolo Ardoino, CTO of Bitfinex and Tether, sheds light on the difference between stablecoins and their algorithmic counterparts:
“If you want to do an algorithmic stablecoin it has to be 300% backed by solid crypto assets–not 105 or 110% or even less. That does not make sense.”
For UST to work, Ardoino shared that you would need 3x the investment, or over $50 million:
More sauce https://t.co/w51pFcLJey
— Paolo Ardoino (@paoloardoino) May 12, 2022
In earlier tweets, Ardoino reminded crypto enthusiasts that “Tether is honoring USDT redemptions at 1$”–as he spread calm among the industry. For crypto veterans such as Whale Panda, the distinction between stablecoins is clear cut; the Tether FUD is “peak FUD”:
People confusing $USDT and $UST and panicking.
People don’t understand the difference between an under collaterized algorithmic stablecoin and a backed stablecoin.
Panic dumping $USDT for $USDC and plain old $USD.
Peak fud time.
Warning: this post will attract “Tether truthers”
— WhalePanda (@WhalePanda) May 12, 2022
The price of USDT has recovered from its very brief dip to $0.95 this morning, but it is still yet to reach dollar parity. In recent developments, Tether has planned to move 1 billion USDT from Tron to Ethereum and Avalanche. This will not change the total supply of Tether, the company said in a tweet.
Samson Mow, CEO of Jan3 and hyperbitcoinization pioneer also rallied the troops behind USDT:
USDt isn’t going to lose its peg. Know when players are just trying to induce panic.
— Samson Mow (@Excellion) May 12, 2022
Since the Castle Island Ventures’ Nic Carter made light of the stablecoin saga, joking about a stable coin even he is set to attend:
might be a bad time… but are we still doing this next week? pic.twitter.com/JyjbpagK8a
— nic carter (@nic__carter) May 11, 2022
USDT has recovered to within 2 basis points of a dollar at the time of writing. Plus, an article shared by the Tether team explained they’re “on track to process $2 billion today.” Danger averted.