Thursday, December 8

With FTX laid out and the crypto Red Wedding fully underway, all eyes have been on tether.

If you’re just getting to grips with the *waves hand* everything currently unfolding, tether is a stablecoin and the world’s third-largest cryptocurrency by market cap. We’ve written a lot about tether over the years but if you still need a top line, here’s how its creators explain it:

Tether tokens are assets that move across the blockchain just as easily as other digital currencies but that are pegged to real-world currencies on a 1-to-1 basis.

Tether tokens are referred to as stablecoins because they offer price stability as they are pegged to a fiat currency. This offers traders, merchants and funds a low volatility solution when exiting positions in the market.

All Tether tokens are pegged at 1-to-1 with a matching fiat currency (e.g., 1 USD₮ = 1 USD) and are backed 100% by Tether’s reserves.

And here’s how it’s going (via Coinmarketcap):

Astute readers will have spotted that an abbreviated Y axis above is adding drama. Nevertheless, it’s still a notable spike in the context of the year to date, almost matching the mid-May freakout.

For what it’s worth, Tether’s chief technical officer seems unfazed:

Though nerves are showing elsewhere:

And, uh, 23 minutes later…

The above is notable because the Tron blockchain is usually the busiest venue (among many alternatives) for tether trading. Ethereum has the most trusted network but Tron’s transaction costs are lower, so it tends to attract the most daily volume.

And to confuse matters further, Tron has its own minor-league stablecoin called USDD. This remains substantially below a buck at pixel time, having drifted away from its peg a day ago, so would be the more obvious candidate for market intervention. But the USDD token is (the Tron website claims) more than 200 per cent overcollateralised as well as being fully backed by tether reserves alone.

Similar to previous wobbles, Tron buying back USDD to par ought to be easy. But for whatever reason, Founder and voracious publicist Justin Sun is prioritising confidence in crypto’s whole rather than the sum of its parts. He put USDD’s depegging down to a supply-demand mismatch from FTX’s collapse while describing crypto’s current state in interdiluvian terms:

Anyway, back to tether. Chief technology officer Paolo Ardoino said on Twitter that the company had processed $700mn in redemption requests over the past day “with no issues”.

It’s tricky to square the redemption number with tether’s reported market value, which as per the graph below has bounced back to $69bn in tandem with a wider market rally. Also worth noting the two sizeable mints of fresh tokens earlier in the week, which together added approximately $500mn to supply.

And while tether has stabilised the comments across social media tell a different story. Things feel pretty precarious right now. And on matters of public confidence FTAV always defers to the wisdom of the crowd:

Further reading
— Tether Says Audit Is Still Months Away as Crypto Market Falters (WSJ)

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