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Can Tether defy naysayers?

Tether, the world’s biggest stablecoin, has put in a more stable shift since May’s meltdown of TerraUSD, a once-heralded competing stablecoin.

However, Tether has noticeably deviated below its intended US$1 peg, since that crisis that sent shockwaves across the crypto world a couple of months ago and the debacle is still reverberating across the sector.

Can Tether defy naysayers?

According to data by CoinGecko, Tether’s market cap stood at about US$ 83 billion as of May 11th – right before the TerraUSD debacle.

At the time of writing, it’s now at $66 billion. That’s about a 20% drop in two months.

 

Bets against Tether on the rise

Despite its resilience relative to the rest of the crypto world (e.g. Bitcoin has fallen by over 28% since May 11th, though has resurfaced above $20k at the time of writing), some segments of the markets believe that Tether has more room to fall.

The Wall Street Journal reported last week that shorts against Tether have been increasing, with such bets by traditional hedge funds in the US and Europe running into hundreds of millions of US dollars, according to one of the largest crypto brokerages for pro investors.

That has prompted Tether’s Chief Technology Officer, Paolo Ardoino, to shore up investor confidence in a series of tweets, including assurances that the most-widely used stablecoin is backed by ample liquid reserves. Tether is apparently backed by reserves ranging from US Treasury bills to other digital tokens, and aims to strengthen those reserves by converting expired commercial papers into more-liquid Treasury bills.

 

Still crypto investors remain wary of Tether’s prospects.

With the Fed hell-bent on combating US inflation by raising interest rates “expeditiously”, with such an aggressive campaign raising the prospects of a recession in the world’s largest economy, riskier assets such as crypto are feeling the brunt of such FUD (slang for “Fear, Uncertainty, Doubt”) about the economic outlook.

Given such macro headwinds, it remains to be seen whether Ardoino’s claim that “Tether is the only stablecoin that is proven with fire under extreme pressure” will hold up.

Perhaps the more assuring outcome for Tether’s believers would be for this stablecoin to be restored to its US$1 peg, the sooner the better.

 

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