It’s certainly been a rough week for cryptocurrencies, especially stablecoins. Following the collapse of TerraUSD and LUNA, Tether (USDT), the world’s largest stablecoin also fell below dollar peg on May 12.
In the first days of the week, UST fell into crisis when its price continuously dropped sharply. In a desperate attempt to restore the UST price, Terraform Labs sold off millions of its stabilizing token, LUNA, causing it to lose 99.95% of its value over the past seven days. Compared to TerraUSD, Tether has a greater influence on the crypto market. It is the third largest coin after Bitcoin and Ethereum and is an important tool for the operation of all exchanges.
If Tether depegged for more than a few hours, it could cause serious trouble for the market.However, unlike TerraUSD’s algorithmic approach, Tether is backed 1-1 by the US dollar, making it, in theory, more resilient. After a sharp drop, Tether recovered up to $0.98 within an hour and gradually climbed back up to $0.99 by noon.
Right from the first drop, Ardoino, CTO of Tether Paolo quickly appeared on Twitter to reassure holders. Tether also shared a video interview with Ardoino to clarify the difference between algorithmic stablecoins like UST and centralized stablecoins like USDT.
The crypto market is facing many difficulties when not only stablecoins but other top coins are also plummeting. Bitcoin lost 27.75% of its value in the past 7 days, trading as low as $26.35; Ethereum fell even more sharply, down 32 percent at $1750.
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