Stable Coin Drops Below Par, and the Digital Currency Market Is in Chaos

Tether has fallen below par following the "death stomp" of TerraUSD, the third largest stablecoin in the cryptocurrency market.

Tether fell to 95.11 cents during the European trading session on Thursday, well below the $1 mark, but has since recovered.

Fitch Ratings stated that the issues with bitcoin mining app Tether and TerraUSD "The fragility of private stablecoins will be highlighted, accelerating calls for regulation.

On Thursday, US Treasury Secretary Janet Yellen testified before Congress that the collapse of TerraUSD demonstrates the dangers of stablecoins pegged to the US dollar, but she added that a drop in stablecoins would not threaten financial stability.

Tether's CTO promises to defend tokens tied to the US dollar.

Stablecoins, which are designed to track real-world currencies, play an important role in the stability of cryptocurrency markets by providing traders with a secure place to store their funds rather than betting on volatile digital currencies.

Tether is the largest operator in the $180 billion stablecoin space, facilitating trading across the cryptocurrency market while also connecting to the mainstream financial system.

The goal of Tether is to remain pegged to the US dollar by holding a reserve of traditional assets. Tether, for example, currently has 80 billion tokens in circulation, implying that it should hold $80 billion in assets. However, information on how those reserves are managed is limited and is not audited in accordance with internationally recognized accounting standards.

Tether Chief Technology Officer Paolo Ardoino vowed to defend the token's peg to the US dollar on Thursday, saying the company has purchased a large amount of US Treasuries and is willing to sell them. However, in an interview with antminer a10prothe Financial Times, he declined to provide details about his $40 billion in U.S. Treasuries because he said he didn't want to embarrass himself "wanted to keep the secret weapon a secret.

Ardoino stated that the company received $2 billion in redemption requests following Tether's collapse, an unusually large number. He did, however, say that Tether can be redeemed for $1 in cash by requesting a wire transfer, which will be handled by the Bahamas' banking partners.

According to the Financial Times, "I'm more concerned about the impact of the Tether collapse on the entire cryptocurrency ecosystem," said Chris Taylor, a partner at proprietary trading firm GSA. He added that maintaining the redemption process is critical to restoring trust in digital currency.

For the time being, the cryptocurrency panic has subsided.

The implosion of the TerraUSD stablecoin on Wednesday sparked widespread panic in the cryptocurrency space, with many predicting a cryptocurrency storm. However, things appear to have calmed down after 24 hours.

Following the collapse of TerraUSD and itsbitcoin earn associated Luna token, TerraformLabs paused and restarted its Terra blockchain.

Tether recovered from a minor crash, and other tokens gained ground. As of 4:45 p.m. in New York, Avalanche was up 8%. According to CoinMarketCap.com, ApeCoin is also up about 25%.

Meanwhile, Bitcoin is up 6% to around $30,000 after falling to around $25,000 overnight.

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