The largest stablecoin Tether USDT is losing its so-called peg correlation with the U.S. dollar today and has slipped below $0.95 which could be the cause of a broader sell-off of Tether and the entire cryptocurrency market:
- Tether is the largest stablecoin in the market to which the largest number of cryptocurrency pairs are traded.
- Stablecoins became a popular topic after the collapse of the third largest stablecoin TerraUSD and the complete failure of the Terra/Luna project, whose creator DoKwon is suspected of creating a ‘Ponzi scheme’ and programmed insolvency.
- Competing stablecoins USDC and BUSD are gaining from Tether’s decline and are up nearly 5%.
- Tether has been controversial many times in the past, it was widely known that the cryptocurrency was not adequately backed by the U.S. dollar and could plunge the market in the future but the belief that Tether was ‘too big to fail’ persisted.
- Tether’s creators have been controversial, some of whom have been convicted in the past for various financial crimes such as running casinos that allegedly enabled, among other things, cheating by having the casino provide card previews for a fee or selling fake Microsoft software during the dot-com bubble. Since 2021, the U.S. Justice Department has been investigating the programmers behind Tether for, among other things, committing bank fraud.
- Despite a scandalous reserve report in May 2021, in which it was revealed that Tether had only a few % coverage in US dollars, the cryptocurrency still remained the largest ‘stable’ cryptocurrency in the market and was widely trusted.
- The deepening ‘depeg’ against the U.S. dollar could become the cause of sharp declines and panic for the entire market and the rise of stablecoins that regularly report U.S. dollar coverage like USDC (Circle) and BUSD (Binance).
- Bitcoin has already slipped below $27,000 and is approaching a two-hundred-session average near 22,000.
Tether is losing to the US dollar. The potential collapse of the largest stablecoin could become a real ‘black swan’ for the cryptocurrency market. In the past, however, each time Tether came out ‘unscathed’ from similar oppressions. Source: xStation5