Tether(USDT), the largest stablecoin, on Thursday slipped to a low of $0.941 in collective stress on the crypto markets.
This comes after the weak sentiment for stablecoins in the crypto market over the market-wide bearish sentiment.
Just following the treacherous incident of UST getting de-pegged that resulted in a collective loss of $50 billion to Luna and UST market capitalization, USDT and USDC seemed to be the next horses in the race that the market might tumble out.
But the founders of Reeve Collins have assured the holders not to panic as Tether is fully backed by the dollar itself and market forces would not let that affect that.
Similarly, a spokesperson from Circle, the company behind USDC, urged to not stress about USDC too as the stablecoin is also backed by cash and short-term U.S Government obligations.
The sell-off even came following the CTO of Tether, Paolo Ardoino on Twitter said that the company is honouring USDt redemptions via Tether.io and more than $300M have been redeemed without a ‘sweat drop’.
Even though being dollar and US securities backed, stablecoins like USDT and USDC have slipped from their pegging in the past too: USDT fell to $0.98 on 16th March of 2020 when crypto and traditional markets responded to news that people were being made to shelter in place to slow the infection of COVID-19. USDC slipped from its dollar peg the similar day, dropping to $0.97.
With a Total publication of eight assurance reports in the seven years of existence of Tether, it is unlikely to imagine a UST like a scenario for USDT as they are fiat collateralized and actually have 1:1 backing.
As of 10th May, Tether’s reserves were 84% cash, cash equivalents, and commercial paper; 5% corporate bonds and precious metals; 5% secured loans and 6% in other assets, like cryptocurrencies.
Even so, a point of concern can be Tether’s 37% holding in the short-term unsecured commercial paper which was on the target of being defaulted upon by Evergrande in September of 2021. Those same commercial papers form $30.6 billion of Tether’s $69 billion reserves at the time.
Contrary to this, in October of 2021, Circle produced a breakdown report of USDC by clarifying that it doesn’t hold any reserves for that kind of unsecured commercial papers but hasn’t provided any significant attestation for full-blown transparency ever since.