Recently the crypto market faced significant instability caused by TerraUSD (UST). With the collapse of the algorithmic stablecoin, other crypto asset projects with stable pricing were affected, such as Tether (USDT).
Considered the largest stablecoin by volume capitalization in the crypto market, USDT has suffered the side effects of the collapse experienced by UST in recent weeks.
As such, US$ 7.4 billion in USDT reserves have been taken out of circulation. Since last week, Tether’s capitalization has slipped from US$83 billion to around US$75 billion.
Tether is affected by UST
In the last week, the UST price has lost parity with the dollar. The stability of the stablecoin’s price was maintained by an algorithm developed by Luna Foundation Guard.
With the collapse of UST, other stablecoins suffered losses in the market. While UST fell below US$0.10 in recent days, USDT lost 5% in value in the crypto market.
This variation was enough for a large redemption on the Tether network. With the deposit of US$ 1 for each USDT unit, the redemption on the network caused the supply of the stablecoin to decline by almost 10%.
On May 12 alone, for example, more than US$2 billion was redeemed from the Tether network by investors using the dollar-priced stablecoin.
Unlike UST, Tether is a centralized stablecoin and has a dollar reserve with 1:1 parity to the USDT. While the Tether network bailout was taking place, other stablecoins experienced a slight growth in the crypto market, such as BUSD, USDC, and DAI.