This information was made public on Friday by a liquidity pool that lets the three biggest stablecoins trade with each other. That was Bitcoin Could Lead to Financial Stability. holding on to a currency that doesn’t change.
Shortly after TeraUSD went down, the value of Tether dropped to $0.95 in what is called a “debagging” event. This week, the market value of Tether fell by $600 million.
Before the TeraUSD sinking on May 6, Tether’s holding in Curve Finance’s 3Pool was at 29 percent. On May 12, when the stablecoin lost its link to the US dollar, it jumped to 82 percent.
What does Tether mean? How does it work?
Bloomberg heard from a representative of Tether that Because USDT is so widely used and easy to get, many investors keep their savings in Tether and trade it for other assets. This is because Tether is a stable coin that a lot of people hold.
To short-sell, you have to first borrow USDT through loans backed by bitcoin or another cryptocurrency. When the price of Tether drops and it no longer keeps its peg, it can be sold and then bought back, but the original Tether must be returned to the lender. The entity’s profit will be based on the difference between how much the item costs to buy and how much it is sold for.
When trading on traditional stock markets, the price of a stock could keep going up forever, which means that short sellers risk losing a lot of money.
Businesses can also buy a put option, which gives them the right to sell Tether when the price is lower in the future.
Tether announced on July 2 that it had cut the amount of commercial paper in its reserves to $4 billion. Commercial paper is sometimes used by companies as a kind of promissory note with a shorter time frame.
Tether wants to back up claims that the reserve structure that supports USDT is sound, so it is reducing the amount of short-term commercial paper it holds. The value of USDT is raised by using a reserve structure made up of many different types of assets.
Even though the company has said many times that its reserves are well protected, more and more people are betting against Tether. The so-called “liquidity pool,” which lets traders trade between the three most popular stablecoins, shows that there is still a lot of Tether. As of Friday, Tether made up 65 percent of the total.
In the last week, the value of Tether on the market has dropped by almost $600 million, bringing the total loss since TerraUSD went down to about $17 billion.
Worries about the company are put to rest.
Since TerraUSD went out of business, Paolo Ardoino, who is the Chief Technology Officer of Tether, has been on Twitter many times to reassure investors. Arduino said that the company acknowledged withdrawals totaling $10 billion after TerraUSD failed to calm worries about not having enough reserves.
This was done to try to ease worries about not having enough reserves. Since then, however, hedge funds have put a lot of money on Tether’s value continuing to go down.
Before the de-pegging event for TerraUSD on May 6, Tether had a 29 percent stake in Curve Finance’s 3pool of tokens. When it reached 82 percent on May 12, the stablecoin suddenly stopped being tied to the US dollar.
Before TerraUSD started moving away from its peg on May 6, Tether’s share of supply was 29.9% on Curve’s 3pool, where traders can swap between Tether, USDC, and DAI. This was right before TerraUSD started trading without being tied to anything.
Even though Tether’s share of the supply has gone down since the TerraUSD problem, it is still a lot higher than it was before the crisis. And some of the declines have been stopped because of what was written in the Journal.