There is a scare with USDT stablecoin. Many traders started FUDing on it when they saw Tether drop below the dollar peg to $0.997, a 0.3% drop. The question is, what caused this fall, should traders be concerned?
Let's get started with what might have caused the drop in the price of USDT.
Curve 3Pool is a pool containing the three most popular stablecoins, USDT, DAI, and USDC in a ratio of 33.3% respectively. It then goes to show that any increase in the pool share value of any of these three stablecoins, shows a big selloff for the pair that increased. For example, an increase in DAI weightage to say 40%, USDT to 28%, and USDC to 31.9% show a selloff of DAI.
What happened today,
Information received and as seen in Cointelegraph showed that A whale address borrowed 31.5 million USDT and exchanged it for USDC, causing a slight deviation in the value of USDT. Then used 17,000 Ether and 14,000 staked Ether as collateral to convert the borrowed amount into USDC using the 1-inch Network.
Afterward, the Whale deposited $10 million into Aave v2 and $21 million into Aave v3. They then took a loan of 12 million USDT from v3 and deposited it into v2.
This action caused a price difference between USDC and USDT. Now, another whale seeing this, mortgaged 52,200 staked Ether (stETH) through Aave v2 and borrowed 50 million USDC using the USDT/USDC price difference.
Remember back in March, USDC depegged below $0.90 when Circle confirmed it had over $3 billion stuck with Silicon Valley Bank. It took Circle two days to repeg USDC but before then, many traders had already cut their losses and swapped for other crypto assets, because they feared it might end like FTX. So, it was natural for us to see this FUD flying around.
Paolo Ardoino, Tether’s chief technology officer took to Twitter
Markets are edgy 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.
So guys, relax, nothing is happening. Don't rush to cut your loss. Stay Safe.