Is USDT, the top stablecoin showing signs of weakness? According to Coinmarketcap data, the coin dropped to $0.9935 at 2.54 pm on May 11. On May 12, the chart shows that there is another dip in the value of the stablecoin with respect to its peg to the dollar. It dropped to $0.9508 at 9.19 am today.
The drop in the value of USDT is also noticeable from Tradingview chart, which shows that the stablecoin also fluctuates from one dollar. At the time of filing this report, the Tradingview chart shows that USDT is trading at $0.99600. 12 hours later, the Tradingview charts shows that USDT had dropped to $0.98200, which represents a deviation of 1,4% from $1. Depending on who you talk to, this could be nothing or it is a sign that the stablecoin is showing a sign of weakness.
Are Slight Fluctuations Normal?
Stablecoins generally have low fluctuations, so users do not worry about this, as long as the differentials is low. Under normal circumstances, no one bothers with a fluctuation of 0.2% – 0.4% such USDT has showed from its charts on May 11. However with the de-pegging of Terra USD, more attention is turning towards the stability of this class of cryptocurrencies.
As the foremost stablecoin of the crypto market, USDT plays a crucial role in stabilizing the coin market. Traders and investors depend on the stablecoin and a few others to hedge the volatility of cryptocurrencies. Pegged to the dollar, the cryptocurrency has a market capitalization of $82 billion. In the past 12 hours, its market capitalization is down to $82 billion.
A reaction from Tajo, a market analyst on Twitter would delight the optimists. According to him:
“This bear market and stablecoins usually depeg from $1 momentarily, but not as much as the bank run that happened with UST. And there’s no fear that is spreading in the market. USDT, USDC and BUSD are tested centralized stablecoins with good reserves. No cause for alarm.”
A Shaky Start for USDT
Launched in July 2014, USDT has played an important stabilization function for the coin market. A 2019 report by Forbes raised doubts about the claims of Tether Holdings LTD, the company behind USDT, that the stablecoin is 100% backed by dollar reserves. Tether has employed the service of an independent audit to prove that USDT is actually backed by USD after years of speculation.The controversy still rages on the authenticity of the claims by Tether that its stablecoin is 100% backed by USD.
Effect of USDT Depeg from The Dollar
If this stablecoin depegs, it’ll be very difficult for people to turn their coins into national currencies and the effect of this will be huge on the coin market. Will USDT Depeg from $1? In a bear market, stablecoins usually depeg by about a dollar or less. What happened with UST is a massive deviation from what obtains even in a bear market such as this.
— wisewizzz (@wisewizzz) May 11, 2022
Top stablecoins have proven over time to be dependable centralized solutions. Although with what happened to UST, it is now obvious that all company-backed cryptocurrencies are high-risk investment for investors. This is the view of Wisewizz, a Twitter user who is critical of somewhat centralized and partly centralized cryptocurrencies.
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