Tether has long faced questions about whether he has enough assets to justify his peg to the dollar.

Tiffany Hagler | Bloomberg via Getty Images

Tether, the world’s largest stablecoin, has resumed its peg to the dollar after more than $ 3 billion worth of tokens were left the system in one day.

The cryptocurrency, which should always cost $ 1, fell 95 cents on Thursday and struggled to return to its estimated peg to the dollar.

On Friday, tether again firmly traded at $ 1, calming investors’ fears about the possible contamination of the cryptocurrency market due to the collapse of the Terra stablecoin project.

TerraUSD, or UST, differs from binding in that it relies on a complex mixture of code and a related token called luna to stabilize its price. It was also partially backed by billions of dollars in bitcoins.

Tether, on the other hand, must be backed by cash, short-term debt obligations corresponding to the equivalent amount of dollars contributed by its users. These assets are in reserve, managed by the company of the same name.

In essence, it’s like a bank account for crypto-investors who often turn to pegging in times of increased market volatility. Most of the bitcoin trading is done in Tether.

Tether’s current turnover is about $ 79.5 billion, up from $ 82.9 billion 24 hours earlier. assuming the company behind it processed more than $ 3 billion in ransoms in just one day.

Greenspan’s mother, CEO of Quantum Economics, said Terra’s defeat had “shaken” the crypto market’s confidence in other stablecoins, such as Tether.

“DeFi [decentralized finance] the market certainly relies heavily on the fact that stablecoins can remain stable, so if things start to unravel, it could be potentially catastrophic for the industry, ”he said.

Paola Ardoina, Tether’s chief technology officer, took to Twitter to reassure investors of the reliability of his company’s stablecoin.

“We had almost $ 3 billion [in] repayments, and they were pretty quickly eliminated through our banking channels, ”Ardoina said in an hour-long conversation on Twitter Spaces live on Thursday.

He added that ransom requests ranged from a minimum of $ 100,000 to $ 600 million.

The problem with UST Terra, Ardoina said, was how fast it grew.

“It’s all fun and games until you become a $ 10 billion stablecoin,” he said. “Until you become a stablecoin at $ 5.10 billion, even if you have some liquidation because you’re backed by a small amount of moon and a small bitcoin share, current cryptocurrencies are still capable of possibly absorbing it.”

“But if you start doubling the size of the stablecoin to $ 20 billion … The market will not be able to absorb such liquidations,” Ardoin added.

Tether has long faced questions about whether he has enough assets to justify his peg to the dollar. The company has previously stated that all of its tokens are backed to each other by dollars kept in reserve.

However, after an agreement with the Attorney General of New York, it became clear that Tether holds a number of other assets – including commercial paper, a form of short-term unsecured debt – to secure his token.

Since then, Tether has reduced the number of commercial papers and says it plans to reduce that amount over time. More than 52% of Tether’s assets are now in U.S. Treasury bonds, and that figure is expected to grow even further if the company talks about breaking down its reserves, Ardoin said Thursday.

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