The price of Tether, the world’s largest stablecoin and the cornerstone of the cryptocurrency ecosystem, fell from its $1 peg on Thursday, adding to fears of a market-wide meltdown and a plunge in cryptocurrency prices.
Important facts
Tether’s USDT — a stablecoin purportedly pegged one-to-one to the U.S. dollar — fell to a low of 94 cents early Thursday, according to Coinbase data.
A major cryptocurrency crash wiped hundreds of billions of dollars from the market after another stablecoin, TerraUSD, lost its peg to $1 entirely, dropping roughly 6% below $1.
Unlike Terra, which maintains a $1 peg by trading paired tokens, its tokens are backed by real money, though the group has been criticized for its lack of transparency about the assets it holds and has been criticized in the United States, Luna said. Commodity futures were fined $41 million by the Exchange Commission in 2021 for misrepresenting reserves.
Tether Chief Technology Officer Paolo Ardoino said on Thursday that the group cashed out USDT for $1 and managed more than $300 million in the past 24 hours “with little effort.”
Key background
Stablecoins are said to be a relatively safe haven in the otherwise very volatile cryptocurrency market. They are kept stable by being linked to other assets, including fiat currencies like the U.S. dollar and tangible assets like gold, or by algorithms. With a market cap of more than $80 billion, Tether is by far the world’s largest stablecoin and third-largest cryptocurrency. It occupies a central position in the digital marketplace, where it is used to complete other transactions and store value.
What to consider
Regulation. Regulators around the world, including the U.S., have identified stablecoins as an area of the cryptocurrency market that needs rules and guidance. Treasury Secretary Janet Yellen has called for a “coherent federal framework” to regulate assets she believes pose risks to financial stability.
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