Tether Crash: Will It Take The Same Path As Terra?

Tether, currently the world’s largest stablecoin, was steadily plunging as its value dropped below the $1 peg on May 12th in the middle of the crypto market crisis. Since TerraUSD’s fall in value, investors have frantically withdrawn savings of more than $10 billion, which would mean that Tether has paid double of its total cash holdings to spooked parties. What Really Led to the Tether Crash? Tether’s bearish market and drop in value to a low of 94% (94 cents) in the second week of May, has led to speculations on whether Tether will crash as irrevocably as Terra has. This began when for a brief amount of time, liquidity pools allowing users to swap Terra with other assets were nearly empty. Panic ensued as people interpreted this as the stablecoin trading below the peg. Since USD was falling very steeply at the time, the prospect of a Tether crash seemed likely. However, the former company has promised savers $1 for every coin they give back to the company, regardless of the current market value. Tether has only allowed direct withdrawals of a minimum of $100,000 per request and charges a 0.1% fee on each redemption. Any coin holder that possesses less than the minimum can only convert their assets into dollars by selling them to other investors. Despite the skepticism of the company’s plan and fear of their ability to honor all incoming redemptions, more than $10 billion has been reallocated in this manner since the short-li...