if started to fall in valuea second stablecoin has shown a similar sign of weakness.in recent days, a central type of token used by merchants — called a — has also begun to lose value, leading to broad questions about the viability of cryptocurrency as an asset class. Days after one of the largest stablecoins called terraUSD,
Tether, the world’s largest stablecoin, had a market cap of more than $82 billion on Sunday. Since then, the value of one chain has fallen from its designated $1 benchmark to 95 cents at 12:24 p.m. PT on Thursdays† This follows the trajectory of terra, which “lost its peg” to the US dollar on Monday and has since lost most of its value.
As the name suggests, stablecoins are cryptocurrency tokens that are backed by an asset – often the US dollar, but not always – and designed to maintain a stable, consistent value. Many crypto traders prefer to use stablecoins, rather than trade tokens directly or use US dollars, as the transactions tend to have lower fees and faster processing.
The word stablecoin “has been used in the broader blockchain ecosystem to define many different token structures, and the truth is, not all of them are stable in the way we would define them,” Denelle Dixon, CEO of Stellar Development Foundation, said in a statement. a statement by email. the base is a non-profit organization focused on payments and supports a number of stablecoins. Dixon previously served as Chief Operating Officer of Mozilla†
The price declines of both terraUSD and tether come amid dramatic declines in the broader cryptocurrency market. Bitcoin and ether, the two largest cryptocurrencies by market capitalization, are both trading at prices more than 20% lower than seven days ago. The crypto market hasaccording to coinmarketcap.com.
“Right now, we are seeing a market correction in crypto in response to interest rate hikes, systemic risk across all financial markets and fears about the rapid rise in inflation,” said Steve Ehrlich, CEO of crypto firm Voyager Digital. in an email statement.
As of Thursday 3pm PT, bitcoin was trading at $28,399 and ether for $1,906† Fears of inflation and rising interest rates may also contribute to the bearish economic outlook for investments outside the cryptocurrency markets.
TerraUSD dropped to 36 cents at 9:35 a.m. PT Thursday, following the official terra Twitter account posted a statement saying the terra blockchain was officially shut down to “prevent governance attacks after severe $LUNA inflation and significantly lower attack costs.”
While tether has not yet suffered the degree of damage from terraUSD, it is a much more important stablecoin. The small price change could have profound repercussions across the entire cryptocurrency ecosystem. But according to the company behind Tether (aka Tether), business continues as normal.
“Tether is pleased to report that it is business as usual amid some anticipated market panic following this week’s market moves,” Tether CTO Paolo Ardoino said in an emailed statement Friday.
The tether stablecoin has become an integral part of global cryptocurrency trading, the mechanism of choice for more than half of all bitcoin traded worldwide as of September 2021, according to CryptoComparea global provider of cryptocurrency market data.
Tether has been embroiled in controversy for years. In 2021, the parent company (aka Tether) and its affiliated cryptocurrency exchange, Bitfinex, were sentenced to pay a $18.5 million fine and cease trading in New York State† The fine was imposed on the companies over a case involving an $850 million cover-up.
“Bitfinex and Tether have recklessly and unlawfully concealed massive financial losses to keep their plan going and protect their profits,” New York Attorney General Letitia James said at the time of the ruling.
Terraform Labs (the company behind terraUSD) did not respond to a request for comment.
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