Tether (USDT) suffers a depeg due to an imbalance in the 3Pool of Curve

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The Tether USDT stablecoin has suffered a depeg due to an imbalance within Curve’s 3Pool.

In this regard, Tether CTO Paolo Ardoino stated that the stablecoin issuer is ready to redeem any amount. Let’s see in detail what is happening. 

Tether depeg: USDT balance increased to over 70%

As anticipated, Tether’s USDT stablecoin suffered a slight imbalance when the Curve 3Pool, one of the main pools for trading stablecoins in decentralized finance, experienced a large imbalance. 

Ideally, Curve’s 3Pool should maintain a balance of 33.33% for each of its three stablecoins – USDT, USDC, and DAI – but USDT’s balance has risen over 70%

This implies that traders are selling a significant amount of USDT for DAI or USDC, which has caused USDT to de-peg to $0.997.

On this, Tether CTO Paolo Ardoino commented as follows: 

“I think the market is really stretched in general. All recent news etc. they are pushing large groups out of the cryptocurrency markets. Tether is the gateway to liquidity, in and out. So when interest in cryptocurrencies grows, we see inflows; when the cryptocurrency market sentiment is negative, we see outflows. We also cannot rule out a direct attack on Tether, as we saw in 2022.”

We also see that the last time the Curve 3Pool experienced a significant imbalance was in March, when the balance of USDC and DAI increased to over 45% each. 

Another imbalance was observed in November, following the collapse of cryptocurrency exchange FTX

Not only that, a similar episode occurred after the collapse of the Terra ecosystem in May 2022, during which the USDT became volatile and temporarily lost its peg.

We emphasize that the USDT’s price discrepancy offers arbitrage opportunities in the market. Although USDT has experienced occasional price discrepancies in the past, it has never maintained a prolonged depeg from its expected value.

Tether’s CTO speaks: “attackers could exploit this moment” 

As anticipated, there were signs of concern among traders this morning as millions units of the stablecoin Tether (USDT) appeared to be sold on the popular Uniswap and Curve pools. 

Currently, Curve’s 3pool holds over $300 million USDT, while DAI and USDC are around $55 million each. However, the above imbalance suggests a greater preference for DAI and USDC over Tether. 

In this regard, in a tweet, Paolo Arduino, CTO of Tether, suggested that some traders may be trying to “capitalize on the general sentiment” in cryptocurrency markets, which has declined in the past 24 hours.

Tether issues new batch of $1 billion USDT on the Ethereum blockchain

On 12 June, Tether issued a new batch of $1 billion of its stablecoin, Tether (USDT), on the Ethereum blockchain. 

This new batch represents the most recent replenishment of USDT in two months since the last one, which took place on 21 April. 

Paolo Ardoino explained on Twitter that this new USDT minting is part of what the company calls “inventory replenishment” on Ethereum. 

Importantly, this issuance will not impact USDT’s overall market cap, as it is an “authorized but unissued transaction.” 

According to Ardoino, the newly minted amount of USDT will be used as inventory to fulfill future issuance requests and perform chain swaps, a process by which traders can transfer digital assets from one blockchain to another. 

Ardoino also pointed out that Tether is constantly working with different cryptocurrency platforms to help them balance USDT liquidity on various blockchains. 

For example, if a cryptocurrency exchange has a surplus of USDT liquidity on the Ethereum blockchain and a shortage on the Tron blockchain, where they are needed to process withdrawals, the exchange will perform a chain swap of its Ethereum-based USDT on the Tron blockchain.

This procedure gives traders access to different blockchains that support the cryptocurrencies they own, allowing them to use digital assets on multiple blockchains.