With Bitcoin and altcoins nosediving, stablecoins are not without problems of their own. The largest stablecoin by market size, USDT has slightly depegged from its usual 1:1 to the US dollar. It dipped to $0.9958 earlier today, representing a 0.42% decline.
The stablecoin’s decline has left significant implications for the Curve3 pool. An imbalance in the pool now means that USDT accounts for over 70% while DAI and USDC account for just over 14% each. This is the first time USDT’s pool reserves have exceeded 50% since November 2022 when FTX collapsed.
Traders seize arbitrage opportunities
A whale address owned by a trader with the pseudonym ‘CZSamSun’ borrowed 31.5 million USDT on AaveV2 and swapped it for USDC. He then deposited 10 million USDC and 21.68 million USDC on AaveV2 and V3 respectively. After that, he borrowed and quickly repaid 12 million USDT on v3 before he withdrew 21.68 million USDC.
It is widely speculated that CZSamSun played a significant role in causing the de-peg. However, it didn’t take much time for other whales to seize the advantage to profit off the price discrepancy.
Data aggregator LookOnChain identified another wallet that followed suit about 20 minutes after CZSamSun.
Tether CTO responds
The slight de-peg of USDT has intensified the existing market turmoil, leading to increased panic.
However, CTO Paolo Ardoino reassured users that the company is well-prepared to handle any type of attack or disruption and that Tether is fully capable of redeeming any amount of funds as needed.
“Markets are edgy in these days, so it’s easy for attackers to capitalize on this general sentiment. But at Tether we’re ready as always. Let them come. We’re ready to redeem any amount,” he has tweeted.
The company is not new to navigating such waters. In November 2022, USDT de-pegged to 97 cents and even summarily traded at 93 cents on Kraken after the implosion of FTX and Alameda Research. Ardoino tweeted then that over $700m in USDT was redeemed for US dollars in 24 hours.
Second largest stablecoin by market cap USDC suffered similar fate in March. After it confirmed that it had $3.3bn stuck in the collapsed Silicon Valley Bank, USDC lost over 10% of its value. It depegged all the way to $0.8774, inducing a widespread industry panic.