CCN has reported that tether pulled $610 million of the stablecoin’s market cap out of circulation since the beginning of October.
The tether coin saw heavy selling on Monday as the U.S. dollar peg cracked, with the coin trading at only $0.92. The move spurred a spike higher in Bitcoin and there was also a move above the $1 mark in Gemini’s new stablecoin, Gemini Dollar (GUSD).
The recent moves are indicative of trading activity around the news, where traders are becoming nervous at the “stability” of the stablecoin. Bitfinex was rumoured to be insolvent, which the exchange firmly denied, whilst tether had faced accusations that its dollar reserves were not enough to back the peg at 1:1 with the current market cap of over $2 billion. The two organisations share the same management team, so with new stablecoins appearing, there is competition and a potential safe haven for worried tether holders. As CCN highlighted, “Tether has not issued any new tokens in October, and the last time that new tokens entered circulation was on Sept. 21, when the treasury sent 50 million USDT to Bitfinex.”
Billionaire crypto investor Mike Novogratz also criticized tether’s role in the problems due to their poor attempts at transparency. Novogratz said the company should stop printing new reserves of USDT and focus on reassuring investors. He saw the lack of transparency as continually hurting tether’s brand. Novogratz was still positive on the role of stablecoins in the crypto market.
Tether has tried to calm the market by providing an update on the reserves situation. This seems to have worked so far but it’s a reminder that the risk of a tether sell-off is still possible. Traders don’t often show patience when there are rumours and a lack of clarity. The fact that the company has halted all new tokens and altered the circulation is maybe a sign that there is some work to be done to convince the market further.