terra and TOPConcerns about other stablecoins rose after the crash in .
The largest stablecoin to publish the latest report on its reserves recently TetheTether’s market value continues to shrink, even though r says, “We’re backed 1 to 1, don’t worry.”
New Explanation Arrived
After the loss of 10 billion dollars in market value, a new statement came from Tether. The following statements were used in the report, which explained the factors behind Tether’s fixation to 1 dollar:
“During volatile times, users and critics more frequently discuss the mechanisms behind how Tether stabilizes USDT and the structure of its reserves.
Tether was recently tested with market volatility and over $10 billion exits.
The results proved Tether to be the most resilient company in crypto and traditional finance.
The basic premise of a stable currency is that each coin is redeemable for a fixed value that is almost always tied to the fiat currency.
USDT can always be used 1-to-1 for the dollar – 1 USDT = $1.
Are Terra and USDT Different?
Given the fact that Terra has lost its stability, it’s natural for investors to ask questions about what is preventing USDT from facing a similar fate.
First, it is very important to understand that Terra and USDT use completely different designs, mechanisms and collaterals.
Terra was an algorithmic stablecoin that was not fully secured at the end of the day. It had a number of mechanisms designed to provide stability, but these ultimately failed.
USDT is quite simply fully backed by collateral.
Tether has recently responded to over $10 billion in redemption requests using collateral that fully backs USDT, while holding steady at $1.
The fact that the stability of 1 dollar is partially broken in the exchanges does not mean that the USDT has broken its stability. This is related to the liquidity demand in the order book of exchanges.
As a result, USDT remains stable not because the USDT price is usually traded at $1 on exchanges, but because of Tether’s ease of redemption for USDT and the collateral behind it. Tether has over $70 billion in collateral to meet USDT demand today.
Almost no bank in the world can process a withdrawal request for 10% of its assets in the same time frame, much less in a few days.
Tether’s ability to use $10 billion is a real-time indicator of its strength and the larger crypto ecosystem’s trust in USDT.”