Tether, the world’s largest dollar-pegged cryptocurrency, fell to $0.95 the day before, but bounced back half a day later and began trading at $0.998. The incident is associated with the devaluation of TerraUSD, another stablecoin. Some traders decided to take advantage of Tether’s fall and made money on it.
The decline in the price of the stablecoin Tether came after another dollar-pegged cryptocurrency, TerraUSD, fell to $0.30 and raised fears that events would develop in a chain reaction in the future. However, the key difference with TerraUSD is that it is not backed by real money. However, Nicholas Bonnet, an analyst at cryptocurrency broker Aplo, said that some traders took advantage of the situation and began to buy cheaper Tether tokens and exchange them at face value.
In the world of cryptocurrencies, stablecoins are a kind of analogue of bank accounts, in which investors can store their funds during periods of acute market volatility. Tether and USDC, the two largest stablecoins, are backed by real money held in reserve for which investors can exchange their digital assets when they wish to withdraw funds.
However, market participants have long expressed doubts that Tether, the company that issued the cryptocurrency, has enough assets to support the peg of tokens to the dollar. Subsequently, with the participation of the Attorney General of the State of New York, it turned out that not only cash, but also securities were present in the Tether reserve. After that, the company began to reduce the share of securities and promised to continue this line.
Tether CTO Paolo Ardoino responded to the incident by saying that cryptocurrency holders will always be able to redeem their tokens at the price of $1. After the sudden drop in the rate, the company, at the request of investors, has already bought $300 million worth of digital assets and is preparing to redeem them for another $2 billion, thereby confirming their stability.
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