(USDT), the world’s largest , briefly dropped 5% on Thursday, falling as low as $0.95.
The stablecoin has recovered some but is still trading at $0.98, according to data from CoinMarketCap. It has a market capitalization of more than $81 billion.
Once the third-largest stablecoin, UST first de-pegged by just a few cents last weekend.
Since then, however, its collapse has been monumental. It briefly fell as low as $0.2998, a 71% decline from its dollar peg, on May 11, 2022.
The coin currently trades at $0.62, according to data from CoinMarketCap.
USDT and UST are two different types of stablecoins. UST is an algorithmic stablecoin controlled by , and USDT is backed by Tether’s reserves.
Understanding Tether’s USDT
One USDT is issued for one dollar’s worth in an equivalent asset deposited into Tether and vice-versa. According to Tether’s transparency report, these assets include cash, corporate bonds, commercial paper, and other assets.
The reserves of Tether backing USDT includes 83.74% cash and cash equivalent, 4.61% corporate bonds and precious metals, 5.27% of secured loans, and 6.38% of other investments, including digital tokens.
Of that 83.74% cash and cash equivalent figure, the firm reports that just 6.36% is in cash and bank deposits.
Of late, redemptions for these digital dollars have reportedly been high.
Over the past 24 hours, more than $300 million of USDT has been redeemed, a process of converting USDT to cash dollars, according to Tether’s CTO Paolo Ardoino.
During redemptions, a dollar from the reserves is sent to the user and USDT is removed from the token’s supply.
“Honouring USDT redemptions at $1,” tweeted Ardoino. “[more than] $300 million had been redeemed in the last 24 hours without a sweat drop.”
Decrypt has yet to hear back from Tether on the matter.
Other stablecoins, including Circle’s USDC and Binance’s BUSD, which are also pegged to the dollar, are trading at a slight premium against USDT.
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