The worlds biggest stablecoin has dropped below its $1 peg
Summary
Nicolas Bonnet, crypto operations manager at French broker Aplo, said some traders were exploiting the drop in tether through arbitrage plays — essentially buying the token for less than $1 and then redeeming it for a dollar. Stablecoins are kind of like the bank accounts of the crypto world, designed to serve as a sound store of value investors can turn to in times of market volatility. Tether and USDC, the two biggest stablecoins, are meant to be backed by a sufficient amount of money held in a reserve to ensure depositors can receive their dollars when they want to make a withdrawal. However, after a settlement with the New York attorney general, it was revealed that Tether relied on a range of other assets including commercial paper, a form of short-term, unsecured debt, to back its token. Bitcoin and other cryptocurrencies took another dive on Thursday as investors reacted to fears around rising inflation and a deteriorating economic outlook, as well as tether decoupling from its dollar peg.