After Terra’s UST stablecoin collapse Tether dropped $10 billion of its reserves. Some experts predict that USDT’s total market dominance may end soon. Is USDT safe to invest?
The mid-May Terra’s UST stablecoin crash raised concerns about stablecoins reliability.
UST token just vanished along with the LUNA crash. That even made Tether USDT to lose its dollar peg for a short period of time.
Despite the market recovery, USDT owners have already taken out billions of dollars.
And some say that could be the end of Tether’s market dominance. Should we believe in such claims?
How safe is USDT, the most popular stablecoin
According to the latest data, USDT has lost some part of its dominance after the Terra/Luna crash. Meanwhile, some other stablecoin tokens like USDC or BUSD have shown sharp growth.
Although the price of these stablecoins maintains the $1 level, the money flow has changed significantly.
For instance, Binance USD market capitalization has risen from $17,3 billion to $18,4 billion. And USDC stablecoin added more than $4 billion to its market cap at the same time.
However, Tether shed around $10 billion of its reserves as the UST collapse undermined users’ trust in the most powerful digital money instrument. Basically, people began to suspect USDT wasn’t safe anymore.
“Such a trend may be a sign that the market is now shifting more towards other stablecoins like USDC and BUSD, with Tether no longer being the sole preferred USD crypto,” Bicoinist observer Hououin Kyouma writes.
Still, Tether USDT has the biggest 24 hours trading volume on the market with $76,6 billion of the asset traded daily.
But USDT holders may be concerned that Tether’s market cap is now only $20 billion more than the USDC capitalization.
Though Tether platform managers are saying that they have money to pay and the network is working stable though. They claim USDT is safe, but can we believe them?
Keep going, Tether
Right after the market crash Tether’s CTO Paolo Ardoino assured that his company has reduced its commercial paper holdings, and increased its US Treasuries as reserves for USDT. That is supposed to make USDT pretty much safe.
Amid the panic in the stablecoin sector, Tether proved that is the most liquid stablecoin on the market. USDT maintained its peg to the dollar despite the massive cash withdrawal.
The USDT dollar peg is backed by a ‘strong, conservative portfolio of cash and cash equivalents like short-term treasury bills, money market funds, commercial papers’, Ardoino concluded.
However, Tether’s CTO refused to share any further details of the investments. “We don’t want to give our secret sauce,” he said.
Lately, the Tether company launched its new stablecoin, pegged to the Mexican Peso. The new MXNT token is now available on the Ethereum, Tron, and Polygon networks. And it is the company’s fourth fiat-pegged stablecoin after USDT (US dollar), EURT (euro), and CNHT (yuan).
“MXN₮ can minimize volatility for those looking to convert their assets and investments from fiat to digital currencies. Tether customers in this entirely new market will be able to benefit from the same transparent customer experience,” the company press release says.
Ardoino explained that the ‘digital Peso’ launch is tied to increased cryptocurrency usage in Latin America over the last year.
Well, let’s see how this move will affect Tether’s market performance.
Sources: Bitcoinist, Tether