Can Tether (USDT) detach from the dollar: expert opinions
Stablecoins solved the problem of high volatility of cryptocurrencies. Also, such assets turned out to be a convenient tool for transfers and storage of savings. Unfortunately, the safety of stablecoins is not proven.
In 2022, against the background of the loss of one of the most capitalized “stable coins” – TerraUSD pegged to the U.S. dollar and the complete depreciation, the problem attracted the special attention of investors. Much has been written about it on letizo.com. Many members of the cryptocommunity began to wonder if the situation could repeat itself with the most capitalized stablecoin, Tether (USDT).
The crypto market will face many challenges in 2022. One of the major shocks was the collapse of the Terra cryptoproject ecosystem amid the loss of its algorithmic stablecoin TerraUSD (UST) parity with the U.S. dollar.Many in the cryptocurrency community believe that the platform’s collapse set off a “death vortex” into which many other projects, including Celsius, Voyager Digital, Babel Finance and BlockFi, have “fallen.”
The TerraUSD incident shook investors’ confidence in algorithmic tokens. Recall, the rate of such tokens corrects the algorithm. Classic – centralized Stablecoins work differently. As a rule, physical assets secure such tokens. Technically, a loss of parity of a classic stablecoin with the underlying asset is possible. The reason could be problems with token collateral.
The most capitalized centralized Stablecoin is Tether (USDT). Its capitalization, now, is $69,177,265,428 (according to CoinMarketCap resource), which corresponds to the third place in the rating of the most capitalized cryptocurrencies.
TRC20 USDT price data. Could Tether lose parity with the US dollar?
Tether TRC20 and other blockchain rates are pegged to the U.S. dollar at a 1:1 ratio. Many experts believe that the loss of USDT token price parity with the U.S. dollar is a very realistic scenario. At the same time, the likelihood of USDT becoming decoupled from the U.S. national currency is extremely low. Tether investors have no guarantee that Stablecoin will never lose parity with the US dollar.
A small depreciation (deviations from the exchange rate of 1 to 1) is quite normal for USDT. Sometimes the deviations are larger than normal. For example, in May 2022, amid the collapse of the Terra ecosystem, USDT briefly traded at $0.94, but quickly returned to $1.
One of the alarm bells was Tether’s equity performance. The figure stopped at 0.2%, 40 times less than the Basel III target of 8% of all assets for state banks.
Tether could lose parity with the US dollar. Anything could happen at all. Maybe a war between the U.S. and China will start tomorrow, and then the dollar will lose parity on anything at all.
USDT price prediction
Due to its centralized nature, USDT price predictions are harder to influence than algorithmic stablecoins. Tether is backed by real assets. As of March 31, 2022, nearly 50% of collateral is U.S. treasuries, some of the safest securities in the world. The U.S. treasuries at the core of Tether’s collateral would only depreciate if the U.S. defaults.
Another 38% of Tether’s collateral consists of bank deposits and corporate bonds, and 14% consists of high-risk unknown assets. The other good news is that Tether is definitely not a pyramid scheme. It just doesn’t fall into that category because it doesn’t offer returns to its users. As a last resort, check out the USDC price chart.
Rumors about the collapse of USDT haven’t stopped for several years, but until now nobody could get even close to Tether. USDC coin price predictions might look even less optimistic. People continue to trust and use this particular stablecoin despite the negative news.
The Tether system has been working steadily for 8 years now. As long as there are no changes in the scheme, investors should not worry too much. That said, USDT holders should keep an eye on the company’s quarterly reports.