Why is Tether (USDT) crypto dropping from its dollar-pegged price?

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Why is Tether (USDT) crypto dropping from its dollar-pegged price?

Why is Tether (USDT) crypto dropping from its dollar-pegged price?
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Highlights:

  • Tether (USDT) slipped from its dollar-pegged price on Thursday.
  • The global crypto market slumped over 7% on Thursday morning.
  • USDT can be traded on exchanges like Binance, OKEx, etc.

Stablecoins were in focus this week as the cryptocurrency market looked set for a major crash. TerraUSD, one of the leading stablecoins, also lost its dollar-pegged price.

Tether (USDT) also lost its US$1-pegged price on Thursday, as the broader crypto market fell 7.55% to US$1.22 trillion. Stablecoins are digital currencies pegged to real-life assets like gold and fiat currencies issued by the government.

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What is Tether (USDT) crypto?

USDT is a stablecoin pegged to the US dollar. It is issued by Tether, a Hong Kong-based company. It maintains the token price by pegging it to the US dollar, realized by holding commercial papers, fiduciary deposits, cash, and other assets equivalent to USD.

USDT was launched as a second-layer crypto-token in 2014. It was initially named Realcoin. However, it was renamed to USTether, and then USDT.

The project, built on the Bitcoin blockchain using the Omni platform, was later updated to work on Ethereum, Algorand, and OMG blockchains.

The USDT token ensures price stability and unrestricted crypto transfers that do not require a third-party intermediary. The token was launched by Brock Pierce, Craig Sellars, and Reeve Collins. It is available on exchanges like Binance, OKEx, Huobi Global, etc.

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What’s happening now?

Tether, one of the biggest stablecoins, lost more than 90% of its value from its US$1-pegged price on Thursday morning.

The decline comes amid a wider crypto crash that wiped off billions of dollars from the market. TerraUSD also slipped from its US$1 pegged price.

TerraUSD regained some losses later. It maintains its pegged price by trading its sister token, LUNA. But Tether holds the price by pegging it to USD. The group has been criticized for its lack of transparency over its holdings. Last year, the US Commodity Futures Trading Commission fined Tether for misleading statements regarding its reserves.

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Tether CEO Paolo Ardoino on Thursday said the company is "honoring USDT redemptions at US$1. He added that it managed over 300 million in the last 24 hours "without a sweat drop".

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Tether (USDT) crypto price and performanceData Source: CoinMarketCap.com

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Bottom line:

The USDT token was priced at US$0.9942 at 9:36 am ET on May 12, down 0.26%, while its volume for the last 24 hours jumped 25.53% to US$175.99 billion. It has a market cap of US$82.34 billion, and its fully-diluted market cap is over US$86.08 billion.

The token has a total supply of 86.71 billion, and its current circulating supply is 82.80 billion. Its lowest price in the last 24 hours was US$0.9485.

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