Investors Withdraw $7 Billion From Tether Due To Stablecoin Fears• May 17, 2022 1:53 pm • Comments
So far, it has been recorded that around $7 billion has already been withdrawn from Tether due to fears over the possibility that the stable coin could lose its dollar peg.
The increase in concerns come following another the UST stable coin’s depegging which resulted in the price of LUNA to drop nearly to $0.
So far, the circulating supply of Tether has already decreased significantly from around $83 billion to around $76 billion.
Historical records show that the price of Tether has also struggled to stick to the $1 mark during these times of increased volatility with the price of the stable coin recently dropping to as low as 95 cents.
* Unidentified = commercial paper, a form of short-term, unsecured debt issued by companies — to support its token.https://t.co/FgvqXvzpIw
— XDC News (@xdc_news) May 17, 2022
The so-called stablecoin is meant to always be worth $1. But on Thursday, its price slipped as low as 95 cents amid panic over the collapse of a rival token called terraUSD.
Most stablecoins are backed by fiat reserves, the idea being that they have enough collateral in case users decide to withdraw their funds. But a new breed of “algorithmic” stablecoins like terraUSD, or UST, attempt to base their dollar peg on code.
That’s been put to the test lately as investors have soured on cryptocurrencies.
Previously, Tether claimed all its tokens were backed 1-to-1 by dollars stored in a bank. However, after a settlement with the New York attorney general, the company revealed it relied on a range of other assets — including commercial paper, a form of short-term, unsecured debt issued by companies — to support its token.
Concerns regarding Tether’s ability to back up each of its stable coins with $1 is also increasing due to not having complete transparency on whether Tether actually has enough reserves.
There have been repeated calls in the past for Tether to undergo a public audit to ensure that the company actually has the reserves that it says it has, but the public audit seems to not have been released yet.
This was despite the fact that the company had claimed that an audit would be available within months and now it has been over a year already.
With that being said, Tether is still the leading stable coin in terms of trading volume today and investors expect that there will be additional scrutiny from a legal perspective due to UST’s recent incident.
The $7 billion was withdrawn within a period of only 48 hours which means that more may be withdrawn soon.
— Max Rokatansky (@cryptohackerpro) May 17, 2022
Tether was not immediately available for comment when contacted by CNBC for this article.
Responding to a Twitter user who urged Tether to release a full audit, Paolo Ardoino, the company’s chief technology officer, insisted its token was “fully backed” and had redeemed $7 billion in the past 48 hours.
“We can keep going if the market wants, we have all the liquidity to handle big redemptions and pay all 1-to-1,” he said.
In a further tweet, Ardoino said Tether is still working on an audit. “Hopefully regulators will push more auditing firms to be more crypto friendly,” he said.
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