Tether claims that his dollar-pegged token is “fully supported.”
Justin Talis | AFP | Getty Images
Investors have shaken up more than $ 10 billion from Tether in the past two weeks amid higher regulatory scrutiny over stable coins.
According to CoinGecko, the world’s largest stablecoin teaser, its circulating supply sank from a record $ 84.2 billion on May 11 to about $ 73.3 billion on Monday. About $ 1 billion was withdrawn on Friday evening.
The cryptocurrency, which is meant to be pegged to the US dollar, is temporarily down to 95 cents after another type of stablecoin, Terra USD – or UST – fell below $ 1 on May 12. As a result, UST-related Luna tokens have been sold, resulting in the loss of more than $ 40 billion in assets to holders.
The collapse of the blockchain terra behind the UST and Lunar has sent shockwaves through the crypto market, pushing Bitcoin and other cryptocurrencies faster. This is a cause for concern for regulators.
Kathleen Bretman, co-founder of Tejos Blockchain, said, “Whenever there is a failure or crash in crypto, there is always the fear that someone will misunderstand the situation and make additional corrections in a position that is not conducive to the whole community.” CNBC.
“As much as I enjoy seeing things that don’t make sense, there’s always a hint like, ‘Are people going to extrapolate from this to a stablecoin that’s something extraordinary?’ That’s the decent thing to do, and it should end there. “
Unlike Tether, the UST was not supported by a reserve Fiat currency. Instead, it relies on some complex engineering where the price stability was maintained through the destruction and creation of UST and its sister Token Luna. Investors were tempted by the promise of 20% savings from Terra’s flagship lending platform Anchor, a rate that many investors said was unsustainable.
Terra creator Do Cowan also deposited billions of dollars worth of bitcoins and other tokens through his Luna Foundation Guard Fund, but almost all of the funds were exhausted in a futile attempt to save UST.
Nevertheless, the panic over the UST has attracted the attention of other stablecoins – especially Tether.
Regulators and economists have long questioned whether Tether has enough resources in reserves to justify his alleged peg of the stablecoin with the dollar.
The company had previously claimed that Tether was backed up by dollars in a bank account, but later revealed that it was using other assets, including commercial paper – short-term corporate loans – and even digital tokens parallel to New York after a settlement with the attorney general.
Last week, Tether said it had reduced the amount of commercial paper it owned and increased its holdings in U.S. Treasury bills. For the first time, the British Virgin Islands-based firm says it also holds some foreign government debt. Tether declined to comment further on the source of his funding, but said it was continuing to examine his reserves more thoroughly.