Tether has vowed to maintain its peg to the dollar “at all costs” following a drop in the price of the world’s most important Stablecoin, which has put new pressure on the cryptocurrency market.
The $ 80 billion token, designed to match $ 1 through a reserve of traditional assets, fell to 95.11 cents on Thursday, according to the CryptoCompare index which tracks trading on the world’s leading digital asset exchanges.
Paulo Arduino, Tether’s VP of technology, said in a Twitter chat on Thursday that the group was willing to “keep the US dollar pegged at all costs.” He said Tether had recently bought a “ton” of U.S. government bonds and was ready Sell them to protect the token.
Stablecoins claim that they provide crypto traders a safe place to park their cash between bets on volatile cryptocurrencies. Tether, arguably the largest stablecoin in the world, plays a crucial role in facilitating trading across the crypto market and also provides a link to the traditional financial system.
The fall in Tether’s price to almost 5% below its $ 1 Pig has affected the digital assets market. Bitcoin, the most traded cryptocurrency, has fallen Almost 7 percent To $ 26,250, the lowest level since December 2020.
Tether says it held nearly $ 35 billion Short-term treasure, Known as banknotes, at the end of last year. However, the group’s reserve data were not audited according to generally accepted accounting principles.
Cryptocurrencies are usually priced compared to the value of stablecoins as opposed to traditional currencies because of the fast settlement times required in the digital assets market. Tether, as the market leader, plays a major role in the market and is often considered as a market index. When the price of Tether changes, it also leaves the wider crypto market more vulnerable to volatility.
What is stablecoin?
Tokens are linked to other assets, usually the largest and most stable currencies in the world. They act as genuine cryptocurrencies and bridge the gap between crypto worlds and traditional financial worlds. They also allow traders to more easily convert traditional currencies into cryptocurrencies for trading.
The currencies can be lent as collateral for trading, or for generating high yields in the form of interest. They are supposed to have a fixed price and be backed up in reserves at all times, allowing users to exercise them. However, critics have asked where some stable currencies are keeping their reserves and whether the assets can be recovered and redeemed quickly.
Read more at FT Crypto Glossary
“The crypto market has been tumultuous this week, and chaos continues to spread,” said Sam Koppelman, UK manager at the Luno Crypto Exchange. “Stablecoins, traditionally a haven for traders in difficult times, feel the heat, and it has a big impact on the rest of the market.”
The decline in Tether comes after TerraUSD, a much smaller stable currency, completely disengaged from its peg against the dollar earlier this week. Tether, unlike TerraUSD, claims to be backed by a basket of dollar-based assets. However, its supporters declined to give detailed details about its holdings.
Tether was fined $ 41 million by the U.S. Commodity Futures Trading Commission last year, amid accusations it made misleading statements at least from June 2016 to February 2019 that it had enough dollar reserves to support each of its stable currencies in circulation.
Regulators have cited stable currencies, most of which are unregulated in most markets, as a risk to financial stability. The Federal Reserve said earlier this week that three stable currencies, Tether, USDCoin and Binance USD, account for 80% of the $ 180 billion market.
Tether breaks $1 peg as pressure mounts on world’s biggest stablecoin Source link Tether breaks $1 peg as pressure mounts on world’s biggest stablecoin