Tether‘s (USDT), the largest stablecoin in the crypto market by market value, experienced a slight decline after losing its dollar peg. This incident happened due to a significant imbalance in one of the best liquidity pools for stablecoin trading in Decentralized Finance (DeFi), Curve’s 3Pool.
The Imbalance in Curve 3Pool Hits USDT
For an ideal balance in Curve’s 3Pool, a rate of 33.33% needs to be maintained for each of the three major stablecoins, USDT, USDC, and DAI. However, USDT’s share in the pool has risen above 70%. This situation indicates that investors are selling too much USDT for DAI or USDC, resulting in USDT losing its dollar peg and retreating to $0.997.
Tether’s CTO, Paolo Ardoino, commented on the situation, “The market is indeed tense. All the recent news is pushing large investor groups to exit the crypto market. Tether serves as a gateway for incoming and outgoing liquidity. Therefore, when interest in the crypto market increases, we see entries, and when interest declines, exits are visible. We cannot disregard a direct attack on Tether, as we have seen in 2022.” Ardoino added that Tether is closely monitoring the situation and will take action when necessary.
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The last imbalance in Curve’s 3Pool occurred in March when the balances of USDC and DAI exceeded 45%. Before that, the balance was upset with the crash of the cryptocurrency exchange, FTX, in November 2022. A similar imbalance was observed during the crash of the Terra ecosystem in May 2022, with USDT losing its dollar peg and making sharp downward movements.
