Stablecoin Meltdown: This Token Loses $7 Billion Within A Week
Ever since Tether temporarily lost the dollar peg last week, rampant liquidation appears to have happened. Apparently, the crypto crash induced by the depegging of another stablecoin, Terra’s UST has had significant effect on investor sentiment.
Massive Tether Liquidation
According to CoinGecko data, as much as $7 billion worth of Tether has been liquidated in the space of one week. From having a market cap of $83 billion last Tuesday to having dropped to $75 billion now, the world’s largest stablecoin suffered a major blow.
Tether also holds the distinction of being the third-largest cryptocurrency, even now. Another stablecoin, USDC, with a market cap of $52 billion, stands at fourth position in terms of market cap. Interestingly, USDC’s circulating supply grew by $4 billion from $48 billion last week, despite widespread market resistance against stablecoins.
On Thursday, Tether price dropped to 95 cents amid a stablecoin meltdown in the cryptocurrency market. This led to a debate among traders over the trustworthiness of stablecoins. Whether there were enough fund reserves that act as collateral to back the stablecoin supply was the cause of concern.
‘Tether Fully Backed’
In this context, Paolo Ardoino, chief technology officer of Tether, said, “Tether is fully backed.” He was responding to a tweet on Tuesday from an analyst asking if all the $75 billion worth of Tether is fully-backed or not.
“We have redeemed 7B in 48h, without the blink of an eye. How many institutions can do the same? We can keep going if the market wants, we have all the liquidity to handle big redemptions and pay all 1-to-1. Yes, Tether is fully backed.”
Adding to this, FTX CEO Sam Bankman-Fried said that successfully redeeming $7 billion proves that there were reserves to send back.
The fears over stability of stablecoins stem from the recent fiasco involving the drastic decline of Terra’s UST. It had also led to uncertainty over the cash reserves of various stablecoins.
However, Bitfinex, the cryptocurrency exchange that operates Tether, claims to support Tether’s value with nearly 84% of cash and cash equivalents. As announced previously, Tether is currently working on an audit, Ardoino said in the tweet thread.
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