Crypto firm Tither has reduced the amount of commercial paper in its reserves.
Jacob Porziki | Nurfoto | Getty Images
The world’s largest stablecoin tither fell below its $ 1 peg on Thursday amid panic in the crypto market.
According to data from CoinGecko, the token dropped below 98 cents at about 3:30 AM ET. It is meant to be pegged one to one with the US dollar.
Tether fell on Wednesday, after the Terra USD, a different stablecoin, fell below 30 cents.
Vijay Ayre, head of crypto exchange Luno International, said the move was likely a result of UST’s sinking “speculation-driven fears”.
“We see the environment ripe for such news events to create waves through the market,” he told CNBC.
Stablecoins are a type of crypto world bank account designed to serve as a valuable resource for investors in times of market turmoil. Tether and USDC, the two largest stablecoins, are backed by a substantial amount of money kept in a reserve so that depositors can get their dollars when they want to withdraw money.
But Tether has long been concerned about whether he has enough resources to back up his intended $ 1 peg. Tether, the company of the same name, previously stated that all its tokens were backed up one by one by the dollars kept in a reserve.
However, after a settlement with the New York Attorney General, it was revealed that Tether relied on other assets, including commercial paper, a form of short-term, unsecured loan, to back up his tokens. Tether has reduced the amount of commercial paper in its reserves and said it plans to reduce it further over time.
Earlier on Thursday, Paolo Ardoino, Tether’s chief technology officer, insisted that Tether holders would always receive $ 1 when redeeming their tokens.
About 300 million teaser tokens have been withdrawn in the last 24 hours “without a drop of sweat,” he tweeted.
Bitcoin and other cryptocurrencies took another dip on Thursday as investors reacted to rising inflation and a deteriorating economic outlook, as well as fears surrounding the tether decoupling from its dollar peg.