Cryptheory – Just Crypto

Cryptocurrencies are our life! Get an Overview of Market News

USDT circulating supply is reduced by more than $7 billion

3 min read


Tether, the company behind the USDT stablecoin, has seen the supply of the stablecoin drop by nearly 10%, as data from CoinMarketCap shows. This was because of investor action, who sold more than $7 billion of the stablecoin.

As it is backed by the dollar, USDT has its offer reduced or increased according to the flow of Tether dollars. For every $1.00 in reservations, the company can issue 1 USDT. Likewise, withdrawing every dollar forces Tether to burn 1 USDT.

This capital outflow movement caused USDT to lose parity with the dollar on May 12. That day, the stablecoin dropped from $1.00 to $0.95 amid fears about the future of stablecoins.

Investors losing confidence in stablecoin

CoinMarketCap data shows that USDT’s circulating supply is currently at $75.9 billion. A week ago, these same values ​​were US$ 83 billion a week ago, that is, there was a drop of 8.55%.

On some exchanges, USDT was even quoted below $0.95. The stablecoin has risen again, but it is still not at exactly $1.00. As a result, investors seemed to have lost confidence and started to sell USDT. It was precisely this move that led to a $7 billion withdrawal, reducing the supply of the stablecoin.

USDT lost parity with the dollar on the fateful 12th of May.  Source: CoinMarketCap.
USDT lost parity with the dollar on the fateful 12th of May. Source: CoinMarketCap.

In addition, Tether’s reserves continue to be criticized, mainly due to the lack of transparency. To mitigate criticism, the company has reduced the risk of its reserves. Last week, we reported that Tether cut USDT’s exposure to risky assets by 50%.

Reserve reports have become more complete, but the market is still questioning whether the stablecoin is actually pegged 1-to-1 with the US dollar.

CEO guarantees USDT backing

On May 17, Tether Chief Technology Officer Paolo Ardoino spoke with Ki Young Ju, CEO of Cryptoquant. Young Ju asked Ardoino if Tether had reserves to guarantee the 75 billion USDT in circulation.

In his answer, Ardoino mentioned the 7 billion USDT that was sold and returned in dollars to its users. According to the executive, Tether’s ability to carry out this operation is proof of the solidity of its reserves.

“We refunded 7 billion USDT in 48 hours without blinking an eye. How many institutions can do the same? Yes, Tether is fully backed. We can continue if the market wants, we have all the liquidity to deal with large redemptions and pay everything”, he guaranteed.

Meanwhile, the decrease in USDT parity has created arbitrage opportunities, including for Tether itself. In this sense, users could buy USDT cheaper on one platform and sell it on another, making a profit.

That is, the USDT parity fluctuates below US$ 1.00, but eventually returns to this level. This means that the parity has remained unchanged so far.

More depeg stablecoins after Terra’s UST

Speaking of auditing, this topic was raised during the conversation between Young Ju and Ardoino. Cryptoquant CEO questioned when the company would provide an audit for USDT.

It should be noted that the company has a transparency portal on its website, but it does not have a complete audit. Ardoino said that the company is working on an audit, a demand much requested by the market.

“I hope regulators will put more pressure on audit firms to be more friendly to the cryptocurrency industry,” he said.

Binance coin price prediction 2022 – 2030

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

Leave a Reply