Over the past few days, we’ve discussed the Terra crash in depth. In case you missed it, Terra’s collapse was initiated by an unknown attack from someone selling a whale-size UST position. The intent of the attack or what exactly caused it is unknown, but there are many theories. Chief among which is that the attack was a “concerted attack” on the Terra ecosystem in which the claimed attacker made off with over $800 million. This attack destabilized the price of the Terra/Luna combination so much that its built-in algorithmic stabilization infrastructure, coupled with the Luna Foundation Guard couldn’t save Terra. UST was de-pegged from USD. Indeed, the crash has caused major troubles for investors in the Terra token and builders on the Terra blockchain, but beyond Terra, other Stablecoins are witnessing selloffs. One example is the non-algorithmic Stablecoin Tether. Tether has one of the largest market caps of all cryptocurrencies and maintains its peg to the US Dollar through a combination of assets like commercial papers: a form of short-term, unsecured debt issued by companies.
Tether has also been pressured into releasing full audits to investors, with Paolo Arduino, the company’s CTO insisting the token was “fully backed” and had redeemed $7 billion in the past 48 hours in response to a tweet asking for full audits. With the nature of stable coins relying on their peg to the dollar, it makes sense that investors want proof to verify the strength of the peg. What do you think about Tether? And do you think non-algorithmic Stablecoins will see better luck than their unlucky counterpart?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.