USDT Faces Sudden Peg Loss as 3Pool Imbalance Triggers Concerns

The popular stablecoin USDT has lost its peg, experiencing a drop below $1 as the ratio of stablecoins in Curve’s 3Pool became imbalanced. With a market capitalization that ranks it as the largest stablecoin, USDT has depreciated by 0.3%, falling to approximately $0.997 USD according to TradingView.

This development occurred as the percentage of USDT in Curve’s 3Pool surged from 33.33% to over 70%, indicating that traders have been converting millions of USDT into two other stablecoins, USDC and DAI.

Amidst the peg loss and sell-off of USDT on Curve, Paolo Ardoino, the Chief Technology Officer of Tether, commented on the tense atmosphere within the cryptocurrency market. Ardoino stated that the overall sentiment in the crypto market was fraught with tension, leading to the devaluation of Tether’s stablecoin to $0.997 USD. In a tweet, he said, “Markets are edgy in these days, so it’s easy for attackers to capitalize on this general sentiment. But at Tether we’re ready as always. Let them come. We’re ready to redeem any amount.”

Source: Coingecko

This is not the first time the stablecoin ratio in Curve’s 3Pool has become imbalanced. The last instance occurred in March when the balances of both USDC and DAI exceeded 45%. A similar situation also arose in November 2022 when FTX, a leading US-based exchange, faced bankruptcy. Prior to that, an imbalance occurred during the collapse of the Terra ecosystem due to the algorithmic stablecoin UST.

Representatives from Tether have assured that they will closely monitor the situation and are prepared to buy back USDT to mitigate any negative impact on the coin itself and the broader crypto market.

The loss of peg by USDT raises concerns about the stability and trustworthiness of stablecoins in general. While stablecoins are designed to maintain a 1:1 peg with a fiat currency, such incidents highlight the challenges they face in maintaining this stability.

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