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With a market value of over $80 billion, USDT is the world’s largest stablecoin, but things are about to get complicated. The price has dropped below $1 due to recent events in the past week. We shared the latest statements from Binance CEO earlier this week. Things have become chaotic since then. Now, with the announcement from Kraken, the situation is becoming even more chaotic.
Tether News
Adam Cochran, a well-known figure in the crypto community, recently highlighted an important detail about the ongoing issues surrounding Tether. Cochran points out the liquidity pool disruption caused by Binance bots selling USDT worth millions of dollars in exchange for DAI. This situation created a serious problem back then.
“The address that swaps USDT -> DAI in bulk is funded by Binance and has multiple addresses that sell USDT in bulk. These are a long chain of addresses that interacted with USDT throughout last year. The addresses started swapping USDT for DAI about 100 days ago. The type of addresses they use. Many of them are dumping Tether into DAI. The address mentioned in this tweet follows a similar pattern of redeeming assets from Binance like BUSD and splitting them up by sending them to multiple addresses, or selling them to Tether (unfreezable DAI) and splitting it. This has been going on for months and ends up with a loss, so automatic market-making tools can’t exist. And for some reason, the seller really accelerated in the last 24 hours.”
If more USDT is dumped into the stablecoin liquidity pool, it could disrupt the balance as it did in previous months. Worse still, these aggressive sales could be a preparation for a major FUD (fear, uncertainty, and doubt) about Tether.
During the week, Binance CEO CZ heavily criticized Tether in an AMA (ask me anything) event. He also made a post about stablecoins not actually being stable.
Cryptocurrencies Could Fall
While bot sales continue, Kraken is facing a significant issue. Customers are unable to deposit/withdraw funds through Deltec Bank. This becomes critical as the same bank is Tether’s largest banking partner. Yes, these seemingly minor disruptions are causing much more concern for investors these days.
Tether only publishes reserve attestation reports. While CZ and others criticize this, we cannot say that exchanges do something different. They also do not submit their financial statements for review by reputable audit firms. However, USDT, which is directly targeted by CZ, is currently the largest in the market with a market cap of $80 billion. So, massive increases in USDT redemptions and potential liquidity issues could send the entire cryptocurrency market plunging. If such a situation occurs, the feared $15,000 target for Bitcoin could become a reality.
Despite all the allegations, the Tether CTO claimed this week that they are strong and that some companies supporting their competitors are targeting them. The Binance CEO was indirectly accused here.
For now, the atmosphere is quite murky, and cryptocurrency investors may find themselves in the midst of the calm before the storm. At this stage, diversifying stablecoin risks could be useful to prevent irreparable losses. We will continue to share more details as they emerge.
At the time of writing, the Bitcoin price is testing $29,000, preparing for a bloody weekend.
