One of the most widely used stablecoins in the cryptocurrency industry is Tether USDT, which recently faced a minor setback that caused significant selling activity among investors. Although it was not a major depegging event, Tether did lose its 1:1 parity with the US dollar.
At Curve DEX, the stablecoin with a market capitalization of more than $82 billion saw its peg with the USD shake a bit, presenting an opportunity for the traders at DeFi exchanges to engage in arbitrage trading. A market intelligence platform named IntoTheBlock broke the news that the USDT has been a significant source of the liquidation happening in DeFi exchanges.
"While there has been significant discourse surrounding #USDT, it continues to be the dominant source of stablecoin liquidity in DeFi & currently accounts for more than 70% of the liquidity in Curve's pool. This brings it close to the peak levels observed in May," they shared on Twitter.
Data provided by coinmarketcap.com showed USDT depegging by about 0.08% in 24 hours. Note that a stablecoin is a cryptocurrency that aims to keep up with the price value of a fiat currency, which in most cases is the US dollar. So USDT depegging meant that it failed to keep up with the US dollar price that day, and it made some traders in DeFi exchanges exploit the volatility.
Please keep in mind that volatility is what enables traders to earn a profit in the market. The tether price has remarkably bounced back from the depeg and is presently being traded at $0.998. Moreover, the trading volume in the last 24 hours has exceeded $21 billion.
Whales Swooping in on the USDT
Immediately Tether depeg happened, whales closed in on the stablecoin and started a massive trading spree to milk the opportunities with the stablecoin depeg. A dumping spree after the Tether depeg accounted for over 73% of the Curve 3pool.
Data provided by Lookonchain show more insights into what happened. Apparently, a whale identified by "0x3356" created a new wallet address. The whale deposited about 52.5 million USDC and borrowed 40 million USDT on Aave and Compound protocols. After borrowing from Aave and Compound, the whale deposited the 40 million USDT into Coinbase and Kraken.
2/— Lookonchain (@lookonchain) June 15, 2023
About 12 hours ago, whale"0x3356" created a new address to deposit 52.5M $USDC and borrowed 40M $USDT on #Aave and #Compound.
Then he started depositing 40M $USDT into #Coinbase and #Kraken 6 hours ago. pic.twitter.com/OKraFhRBdy
By doing this, the whale caused the lending rate at Aave to go very high. The move even made the lending rate of the USDT to be higher than the deposit rate. The deposit rate was only about 20%, while the lending increased by more than 30%. After initiating these transactions, another group of whales made another one involving the USDT. About 9.6 million worth of USDT, as per data from Lookonchain, were sold by two whales.
Any Hope for Tether?
You know that Tether depegged on the 15th, and crypto whales closed in to make profits. But is there any hope for full Tether recovery?
Tether CTO Paolo Ardoino has already released a statement concerning the new development on Twitter. According to him, the company is more than ready for any situation, and they are confident the stablecoin will fully recover.
"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," he said.