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Stablecoins Dumped As Tether Founder Sees End Of Algorithmic Tokens

Stablecoins were under pressure after the crash of UST algorithmic stablecoin in mid-May, with traders offloading their tokens en masse.
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Stablecoins Dumped As Tether Founder Sees End Of Algorithmic Tokens

Stablecoins were under pressure after the crash of UST algorithmic stablecoin in mid-May. Tether co-founder Reeve Collins on Thursday said the UST collapse could mean the end of most algorithmic stablecoins. However, USDT also temporarily lost its peg to the US dollar, witnessing massive redemptions.

The crash of UST brought stable coins under the scrutiny of governments and regulators worldwide. The U.S. and the U.K. governments have even planned to introduce regulations around stablecoins.

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Stablecoins Lose Shine Amid UST Crash

Tether co-founder Reeve Collins says algorithmic stablecoins supposed to be pegged to the US dollar have fewer chances of survival as they are based on algorithms. Whereas, coins such as USDT and USDC are backed by cash, U.S. Treasury, and corporate bonds. He said:

“It’s unfortunate that the money… was lost, however, it’s not a surprise. It’s an algorithmic-backed, stable coin. So it’s just a bunch of smart people trying to figure out how to peg something to the dollar.”

Meanwhile, Jeremy Allaire, CEO of Circle, believes people will continue to create algorithmic stablecoins in order to seek a stable value and better algorithm to peg with the US dollar.

According to the on-chain analytics platform Santiment, the TerraUSD (UST) collapse and temporary de-peg of Tether (USDT) spurred fears across the crypto market. Throughout May, stable coins moved heavily into crypto exchanges, with whale activity becoming significantly limited.

Top Stable coins Address Holders Comparison. Source:

Meanwhile, Circle’s stablecoin USDC and DAI have seen their market cap rise significantly as traders moved to other stablecoins such as USDC, DAI, and BUSD.

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Regulations To Push More Pressure on Stable Coins

Stablecoins will be under pressure after the implementation of rules and regulations. The crypto transactions could possibly be tracked by governments due to increased scrutiny and control.

Bertrand Perez, CEO of the Web3 Foundation, said:

“I expect that once we have a clear regulation of stablecoins, the basic rules of the regulation would be that you have a clear reserve with a set of assets that are strong, that you’re subject to regular audits of those reserves.”

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Varinder Singh

Varinder has over 10 years of experience and is known as a seasoned leader for his involvement in the fintech sector. With over 5 years dedicated to blockchain, crypto, and Web3 developments, he has experienced two Bitcoin halving events making him key opinion leader in the space. At CoinGape Media, Varinder leads the editorial decisions, spearheading the news team to cover latest updates, markets trends and developments within the crypto industry. The company was recognized as Best Crypto Media Company 2024 for high impact and quality reporting. Being a Master of Technology degree holder, analytics thinker, technology enthusiast, Varinder has shared his knowledge of disruptive technologies in over 5000+ news, articles, and papers.

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Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
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