It looks like the largest stablecoin in the world, Tetther (USDT), is currently under unbearable pressure to liquidate. This is a result of the ongoing turmoil and crash in the crypto market. The coin has fallen in value by 4.8% to trade at 0.9508 – its lowest point since the crypto crash in 2017.

It is very uncharacteristic of the coin to have this level of decline since it is expected to have a ratio of 1:1 in relation to the US Dollar. The coin’s holders and investors are worried about any situation that would cause it to get depegged from the Dollar following Terra’s loss of its pegged position this week.

There has been an extreme case of consolidation of losses since the past week. This has got the overall market capitalization falling to nearly $900 billion.

USDT has a position as the largest stablecoin in the world and number three on the list of top cryptocurrencies with a market capitalization of $81.8 billion. It is, therefore, the most utilized token in carrying out crypto transactions.

Reasons Behind USDT Depegging?

It looks like investors are pulling their funds away from the crypto market as the crash goes on. Given the global use of USDT in transacting crypto businesses, there is a likelihood that it is been sold off for US Dollars as traders are limiting their exposure to crypto losses.

It also appears that traders are buying other counterparts of USDT such as USD Coin (USDC) and Binance USD (BUSD). This shows they are taking some defensive positions against the coin. USDC and BUSD have since gone up by 0.3% and 1.6% respectively.

As a means of giving some reassurance to investors, the founder of USDT, Paolo Ardoino said that the coin had given access to some $300 million requests to US Dollars in the past 24 hours. This, he said was done without dropping any sweat. 

Uncertainty Envelops Tether’s Reserve

The crypto exchange operating USDT, Bitfinex, has claimed that it backs the USDT value with a huge pool of reserves. With regard to reports from Bitfinex, almost 84% of the pool in question consists of cash and its equivalents.

But over time, Bitfinex has received criticism from various angles for lacking sufficient transparency about activities in its reserves. The latest sell-off might equally have been facilitated by the uncertainty of the firm’s ability to adequately back the token up in the event of more pressure.

After the crash of UST, the confidence of investors in stablecoins might come under serious question. This might be another factor that influences the selling seen around Tether.

Financial regulators in the United States, including the Secretary of the Treasury, Janet Yellen, have cited the recent UST crash in their criticism of the general stablecoin ecosystem.