The market’s first stablecoin, Tether (USDT) is once again in the spotlight after around $9 billion worth of USDT was exchanged for US dollars by users following the collapse of TerraUSD (UST).
These buybacks took place as USDT traded on the stock exchanges at a rounding error near its benchmark of $1. At the time of writing, the stablecoin was trading at $0.9989 according to coin-tracking site CoinMarketCap, and $0.99917 according to CoinGecko.
Evolution of the price of Tether in May:
It seems that users are still nervous since the collapse of UST, the algorithmic stablecoin of the Terra Network (LUNA). And given that Tether has been the subject of rumors for several years that it might not be fully collateralised, user jitters quickly turned to this particular stablecoin in the days following the debacle around the UST on May 9.
Commenting on the situation on Wednesday of this week, Jim BiancoPresident of the Investment Analysis Society Bianco Researchpointed out that a pool of Tether liquidity on the decentralized finance (DeFi) platform Curve (CRV) remains unbalanced.
“Not enough to break the peg, but enough for Tether to stay consistently in the southern end of $1.00 (approx. 0.998) and DAI/USDC consistently stay in the northern end of $1.00 (approx. 1.002)” , has writing the analyst.
Bianco added that the large-scale buybacks that Tether is currently experiencing have not been seen in DeFi since the so-called “DeFi summer” in the spring of 2020. Therefore, large buybacks are an entirely new situation for many of the most popular DeFi protocols today, he said.
Others, including John Reed Starka consultant and lecturer at Duke University School of Law, were even more blunt in their criticism of Tether, affirming that sounds like the same grim refrain from Madoff, Theranos and Enron.”
“For Former Law Enforcement Lawyers [de la Commission américaine des valeurs mobilières et des changes] like me, it’s deja vu once again. No one knows the true nature of Tether’s support. Tether won’t divulge it, saying ‘we don’t want to share our secret sauce’,” Stark tweeted.
However, some of the most well-known veterans of the Bitcoin (BTC) and crypto space, including Adam BackCEO of Bitcoin development company Blockstreamcalled the accusation “incorrect”.
“Tether has never bought back below parity, and it bought back 7 billion USD in a few days,” said declared Back, while referring to an earlier Twitter thread where he pointed out that every USDT that was redeemed, was redeemed at 1:1 parity with the US dollar.
“Contrary to media reports, USDT hasn’t lost its peg at all,” said declared this early Bitcoin user and computer scientist.
At last, Zhu Suthe co-founder of the crypto hedge fund Three Arrows Capital, and other analysts have also argued that USDT buybacks in no way prove that Tether has no collateral. This “proves the opposite, that redeeming USDT for an equivalent USD value is possible,” the popular investor wrote.
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