Depeg

Crypto users turned to DEXs, loaded up on USDC after Silicon Valley Bank crash

The collapse of FTX led to a similar exodus from centralized exchanges, as users worried they may lose access to funds during crises.

The collapse of Silicon Valley Bank saw investors loading their bags with USD Coin (USDC), along with an exodus of funds from centralized exchanges (CEXs) to decentralized exchanges (DEXs).

Outflows from centralized exchanges often spike when the markets are in turmoil, blockchain analysis firm Chainalysis said in a March 16 blog post, as users are likely worried about losing access to their funds when exchanges go down.

Funds sent from CEXs to DEXs following SVB’s collapse. Source: Chainalysis

The Chainalysis data shows that hourly outflows from CEXs to DEXs spiked to over $300 million on March 11, soon after SVB was shut down by a California regulator.

A similar phenomenon was observed during the collapse of cryptocurrency exchange FTX last year, amid fears that the contagion could spread to other crypto firms.

However, data from the blockchain analytics platform Token Terminal suggests that the surge in daily trading volumes for large DEXs was short-lived in both cases.

Daily trading volumes for large DEXs from September to March. Source: Token Terminal

USDC was identified as one of the top assets being moved to DEXs, which Chainalysis said was unsurprising given that USDC depegged after stablecoin issuer Circle announced it had $3.3 billion in reserves stuck on SVB, prompting many CEXs like Coinbase to temporarily halt USDC trading.

Related: Circle clears ‘substantially all’ minting and redemption backlog for USDC

What was surprising, Chainalysis noted, was the surge in USDC acquisitions on large DEXs such as Curve3pool and Uniswap. “Several assets saw large spikes in user acquisition, but none more than USDC,” the blockchain analysis firm wrote.

Token acquisitions on Uniswap from March 7 to March 14. Source: Chainalysis

Chainalysis theorized that this was due to confidence in the stablecoin, with some crypto users loading up on USDC while it was relatively cheap and betting that it would regain its peg — which it did on March 13 according to CoinMarketCap.

USDC’s brief depeg from March 11 to March 13. Source: CoinMarketCap

Circle CEO ‘able to access’ $3.3B of USDC’s reserves at Silicon Valley Bank

Circle’s earlier disclosure that $3.3 billion worth of USDC reserves were held with Silicon Valley Bank resulted in it losing market share to its competitor USDT.

Circle CEO and co-founder, Jeremy Allaire, confirmed that, as of March 13, the stablecoin issuer has been “able to access” its $3.3 billion of funds held with the collapsed bank, Silicon Valley Bank (SVB).

Speaking with Bloomberg Markets on March 14, Allaire said that he believed that “if not everything, very close to everything was able to clear” from the failed lender.

USD Coin (USDC) — the stablecoin issued by Circle — briefly de-pegged following news that $3.3 billion of its cash reserves were stuck on SVB.

The stablecoin’s dollar peg has since recovered, but mass redemptions of USDC have resulted in the market cap of the stablecoin dropping by nearly 10% since March 11 according to TradingView.

The market cap of USDC from March 8 to March 14. Source: TradingView

Meanwhile, throughout the same timeframe, USDC peer Tether (USDT) has recorded a slight increase in its market cap since March 11, climbing by over 1% to $73.03 billion.

Related: USDC depegged because of Silicon Valley Bank, but it’s not going to default

The temporarily locked funds had a significant effect on USDC given the $3.3 billion represented less than 8% of the token’s reserves according to its January reserve report released on March 2.

The report asserted USDC was over 100% collateralized with over 80% of the reserve consisting of short-dated United States Treasury Bills — highly liquid assets which are direct obligations of the U.S. government and considered one of the safest investments globally.

Circle ‘able to access’ $3.3B of USDC reserves at Silicon Valley Bank, CEO says

Circle’s earlier disclosure that $3.3 billion worth of USDC reserves were held with Silicon Valley Bank resulted in it losing market share to its competitor USDT.

Circle CEO and co-founder Jeremy Allaire says that since March 13, the stablecoin issuer has been “able to access” its $3.3 billion of funds held with the collapsed bank, Silicon Valley Bank.

Speaking with Bloomberg Markets on March 14, Allaire said that he believed that “if not everything, very close to everything was able to clear” from the failed lender.

USD Coin (USDC) — the stablecoin issued by Circle — briefly de-pegged following news that $3.3 billion of its cash reserves were stuck on SVB.

The stablecoin’s dollar peg has since recovered, but mass redemptions of USDC have resulted in the market cap of the stablecoin dropping by nearly 10% since March 11, according to TradingView.

The market cap of USDC from March 8 to March 14. Source: TradingView

Meanwhile, throughout the same timeframe, USDC peer Tether (USDT) has recorded a slight increase in its market cap since March 11, climbing by over 1% to $73.03 billion.

Related: USDC depegged because of Silicon Valley Bank, but it’s not going to default

The temporarily locked funds had a significant effect on USDC, even though the $3.3 billion represented less than 8% of the token’s reserves, according to its January reserve report released on March 2.

The report asserted USDC was over 100% collateralized with over 80% of the reserve consisting of short-dated United States Treasury Bills — highly liquid assets thatare direct obligations of the U.S. government and considered one of the safest investments globally.

Bitcoin futures premium falls to lowest level in a year, triggering traders’ alerts

On March 12, Bitcoin futures traded 5.5% below regular spot exchanges, causing volatility in derivatives markets.

The price of Bitcoin (BTC) increased by 14.4% between March 12-13 after it was confirmed that financial regulators had rescued depositors in the failing Silicon Valley Bank (SVB). The intraday high of $24,610 may not have lasted long, but $24,000 represents a 45% increase year-to-date.

On March 12, U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg issued a joint statement to reassure SVB depositors.

Regulators also announced a systemic risk exception for Signature Bank (SBNY), an intervention designed to compensate depositors for losses incurred by the previous management. Signature Bank was one of the most prominent financial institutions serving the cryptocurrency industry alongside Silvergate Bank, which announced its voluntary liquidation last week.

To avert a larger crisis, the Fed and Treasury devised an emergency program to supplement all deposits at Signature Bank and Silicon Valley Bank with funds from the Fed’s emergency lending authority. According to the regulators’ joint statement, “no losses will be borne by the taxpayer,” although the strategy for deploying Treasury assets is questionable.

The stablecoin USD Coin (USDC) also caused significant turmoil in the cryptocurrency industry after breaking below its 1:1 peg with the U.S. dollar on March 10. The fear grew after the issuing management company Circle confirmed that $3.3 billion in reserves were held at Silicon Valley Bank.

Such an unusual movement caused price distortion across exchanges, prompting Binance and Coinbase to disable the automatic conversion of the USDC stablecoin. The decoupling from $1 bottomed near $0.87 in the early hours of March 11 and was restored to $0.98 after the FDIC’s successful intervention in the SVB crisis was confirmed.

Let’s take a look at Bitcoin derivatives metrics to see where professional traders stand in the current market.

Bitcoin futures metrics flipped to extreme fear

Bitcoin quarterly futures are popular among whales and arbitrage desks. These fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts in healthy markets should trade at a 5-to-10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Bitcoin 3-month futures annualized premium. Source: Laevitas.ch

The chart shows traders had been neutral-to-bearish until March 10 as the basis indicator oscillated between 2.5% and 5%. However, the situation quickly changed in the early hours of March 11 as the stablecoin USDC decoupled and cryptocurrency exchanges were forced to change their conversion mechanisms.

Consequently, the Bitcoin three-month futures premium turned into a discount, otherwise known as backwardation. Such movement is highly unusual and reflects investors’ lack of trust in intermediaries or extreme pessimism towards the underlying asset. Even as the USDC stablecoin price approaches $0.995, the current 0% premium indicates a lack of leverage buying demand for Bitcoin via futures instruments.

Related: Crypto investment products see largest outflows on record amid SVB collapse

Crypto-fiat gateways are key to reclaiming improved market dynamics

By reclaiming the $24,000 support, Bitcoin has restored levels unseen since the Silvergate Bank stock price collapse on March 1 after the delayed filing of its annual 10-K financial report. Moreover, crypto exchanges and stablecoin providers were forced to suspend U.S. dollar deposits, with the closure of Signature Bank affecting Okcoin.

Banking options for crypto firms, including exchanges, are likely to become more limited as traditional banks remain wary of the sector. According to some analysts, U.S. regulators are purposefully discouraging major banks from doing business with cryptocurrency exchanges.

Fiat gateway on and off ramps are critical for stablecoins, market markers and cryptocurrency exchanges for a variety of reasons. The ability to convert Bitcoin to cash and vice versa is critical for their day-to-day operations, so the longer it takes to find new banking partners, the more difficult it is for stablecoins to allow redemptions and exchanges in order to maintain a high level of liquidity.

Derivatives metrics may have recovered from the initial banking crisis contagion risk, but they still indicate Bitcoin bulls’ lack of confidence in a long-term recovery.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

How and why do stablecoins depeg?

Discover the causes and mechanisms behind stablecoin depegs.

Stablecoins are a type of cryptocurrency designed to have a stable value relative to a specific asset or a basket of assets, typically a fiat currency such as the U.S. dollar, euro or Japanese yen.

Stablecoins are designed to offer a “stable” store of value and medium of exchange compared with more traditional cryptocurrencies like Bitcoin (BTC) and Ether (ETH), which can be highly volatile.

Fiat money, cryptocurrencies, and commodities like gold and silver are examples of assets used to collateralize or “back” stablecoins. Tether (USDT), USD Coin (USDC) and Dai (DAI) are a few examples of stablecoins pegged to the U.S. dollar.

Stablecoins can also be algorithmically stabilized through smart contracts and other mechanisms that automatically adjust the supply of the stablecoin to maintain its peg to the underlying asset.

Despite the potential benefits, stablecoins are not without risks. The most significant risk with any stablecoin is the potential for its peg to break, causing it to lose its value relative to the underlying asset.

Depegging is where the value of a stablecoin deviates significantly from its pegged value. This can happen for various reasons, including market conditions, liquidity issues and regulatory changes.

USDC is a fully reserved-backed stablecoin, meaning every USD Coin is backed by actual cash and short-dated United States treasuries. Despite this, USDC issuers, Circle, announced on March 10 that USDC had depegged from the U.S. dollar, with around $3.3 billion of its $40 billion in USDC reserves stuck in the now defunct Silicon Valley Bank. The bank — the 16th-largest in the U.S. — collapsed on March 10, and is one of the biggest bank failures in U.S. history. Given USDC’s collateral influence, other stablecoins followed suit in depegging from the U.S. dollar.

Related: USDC depegs as Circle confirms $3.3B stuck with Silicon Valley Bank

MakerDAO — a protocol based on the Ethereum blockchain — issues DAI, an algorithmic stablecoin designed to preserve a precise 1:1 ratio with the U.S. dollar. However, DAI also fell off its peg amid the Silicon Valley Bank’s collapse, mainly due to a contagion effect from USDC’s depegging. Over 50% of the reserves backing DAI are held in USDC.

Tether issues USDT, with every USDT token equivalent to a corresponding fiat currency at a 1:1 ratio and fully backed by Tether’s reserves. However, USDT also experienced a depegging in 2018, which raises concerns about the overall stability mechanism of stablecoins.

Importance of stablecoin pegs

The importance of stablecoin pegs is in providing a stable and predictable value relative to an underlying asset or basket of assets — typically a fiat currency like the U.S. dollar. Stablecoins are a desirable alternative for various use cases, including cryptocurrency trading, payments and remittances, due to their stability and predictability.

With stablecoin pegs, traders may enter and exit positions without being subjected to the price fluctuations of cryptocurrencies like BTC or ETH. This is important for institutional investors and companies that depend on a reliable store of value and a medium of exchange to run their operations.

Cross-border transactions can also be made more accessible using stablecoin pegs, especially in nations with volatile currencies or restricted access to conventional financial services. Compared with more traditional methods like wire transfers or remittance services, stablecoins can offer a more effective and affordable way to make payments and transfer value across borders.

Stablecoin pegs can also increase financial inclusion, especially for people and enterprises without access to traditional financial services. Stablecoins can be used to make payments and transact in digital assets without requiring a bank account or credit card, which can be crucial in developing and emerging markets.

Why do stablecoins depeg?

Stablecoins can depeg due to a combination of micro and macroeconomic factors. Micro factors include shifts in market conditions, such as an abrupt increase or decrease in stablecoin demand, problems with liquidity and modifications to the underlying collateral. Macro variables involve changes in the overall economic landscape, such as inflation or interest rate increases.

For instance, a stablecoin’s price can momentarily exceed its pegged value if demand spikes due to increased cryptocurrency trading activity. Yet, the stablecoin’s price could drop below its fixed value if insufficient liquidity matches heightened demand.

On the macroeconomic front, if there is high inflation, the purchasing power of the underlying assets that support the stablecoin may drop, leading to a depeg event. Similarly, adjustments to interest rates or other macroeconomic measures may impact stablecoin demand.

Regulatory changes or legal issues can also cause a stablecoin to depeg. For example, if a government were to ban the use of stablecoins, demand for the stablecoin would drop, causing its value to fall. A depegging event can also be caused by technical problems like smart contract bugs, hacking attacks and network congestion. For instance, a smart contract flaw could result in the stablecoin’s value being computed improperly, causing a sizable departure from its peg.

How do stablecoins depeg?

Stablecoin depegging typically occurs in a few steps, which may vary depending on the specific stablecoin and the circumstances that lead to the depegging event. The following are some general features of a depegging event:

The stablecoin’s value deviates from its peg

As noted, many factors, such as market turbulence, technological problems, a lack of liquidity and regulatory problems, may result in a stablecoin depeg. The value of the stablecoin may change dramatically relative to the pegged asset or basket of assets.

Traders and investors react to the depegging event

Whether they think the stablecoin’s value will eventually return to its peg or continue to diverge from it, traders and investors may respond by purchasing or selling the stablecoin when it dramatically departs from its peg.

Arbitrage opportunities arise

Arbitrage opportunities could materialize if the stablecoin’s value drifts away from its peg. For instance, traders may sell the stablecoin and purchase the underlying asset to benefit if the stablecoin’s value is higher than its peg.

The stablecoin issuer takes action

The stablecoin issuer may take action to rectify the problem if the stablecoin’s value continues to stray from its peg. This may entail changing the stablecoin’s supply, the collateralization ratio and other actions to boost trust in the stablecoin.

The stablecoin’s value stabilizes

If traders and investors adjust their positions and the stablecoin issuer responds to the depegging event, the value of the stablecoin may stabilize. The stablecoin’s value might return to its peg if the stablecoin issuer successfully wins back public trust.

Risks and challenges associated with stablecoins depegging

Depegging stablecoins can present several risks and difficulties for investors, traders and the larger cryptocurrency ecosystem:

  • Market volatility: When stablecoins depeg, the market may experience severe turbulence as traders and investors alter holdings in response to the depegging event. This could lead to market uncertainty and raise the possibility of losses.
  • Reputation risk: Depegging stablecoins risks the issuers’ and the larger cryptocurrency ecosystem’s reputation. This may make it harder for stablecoin issuers to draw in new users and investors and decrease the market’s total value.
  • Liquidity risk: Liquidity issues may arise if a stablecoin depegs because traders and investors sell the stablecoin in significant quantities. As a result, the value of the stablecoin may decrease, making it challenging for traders and investors to liquidate their holdings.
  • Counterparty risk: Traders and investors may be exposed to the risk of default by the stablecoin issuer or other parties participating in the stablecoin’s operation due to the depeg event.
  • Regulatory risk: Stablecoins depegging can also bring about regulatory problems. Governments and authorities may impose restrictions on stablecoins if they believe that the assets threaten the stability of the broader financial system.

Related: Circle’s USDC instability causes domino effect on DAI, USDD stablecoins

Considering the above risks, investors and traders alike should keep a close eye on the performance of stablecoins in their portfolios. Research the stablecoin issuer and its collateralization, and be on the lookout for any indications of depegging or other problems that might impact the stablecoin’s value. They can also think about diversifying their holdings by using a variety of stablecoins or other assets. This can lessen the chance of suffering losses in a stablecoin depegging event.

Crypto Twitter calls for calm after wETH insolvency joke goes viral

Ethereum bull Anthony Sassano and Gnosis co-founder Martin Köppelmann were among those explaining later that the Wrapped Ethereum (wETH) FUD was part of an inside joke.

An inside joke about the “insolvency” of Wrapped Ether (wETH) over the weekend has forced influencers to explain it was just a “shitpost” after members of the community took it as real. 

The wETH insolvency FUD (fear, uncertainty and doubt) seemingly began to make the rounds on Nov. 26, with false rumors alleging that wETH isn’t backed 1:1 by Ether (ETH) and is insolvent.

Blockchain developer and contributor to the ERC-721A token standard cygaar was one of the first to spread the joke, before confirming in a subsequent post that it was in fact a “shitpost” to see who was reading his content.

In fact, only a day before, cygaar tweeted that “WETH cannot ever go insolvent” and that “WETH will always be swappable 1:1 with ETH.”

Ether bull and host of The Daily Gwei Anthony Sassano also joined in on the wETH joke with his own parody post on Nov. 27 but had to clarify later that the initial post was “shitpost/ meme” after reading the replies.

Gnosis co-founder Martin Köppelmann was another one to get in on the joke, claiming in a Nov. 27 Tweet to his 38,800 Twitter followers that wETH is no longer fully backed by ETH and that “we might see a bank run on redeeming WETH soon.”

Hours later, he said he hoped the joke “did not cause too much confusion,” linking to a thread that explained the joke for those who weren’t in the know.

Related: What is wrapped Ethereum (wETH) and how does it work?

Speaking to Cointelegraph, Markus Thielen, the head of research at crypto financial services platform Matrixport, has also confirmed that there is little to no truth to the WETH “shitposts.”

wETH’s logic is automated by smart contracts and it isn’t controlled by a centralized entity, he explained:

“I am not too concerned about WETH as it’s a smart contract and not stored by a centralized exchange. Since the smart contract is open source, it can be checked for bugs or flaws.”

On the other hand, recent FUD against Wrapped Bitcoin (wBTC) could be warranted, said Thielen, referring to rumors that FTX may have printed 100,000 wBTC out of thin air, as FTX’s Nov. 11 bankruptcy filing does not show any Bitcoin (BTC) on FTX’s balance sheet.

“WBTC is completely different and here the concerns are valid,” Thielen explained. 

wETH is a wrapped version of ETH that is pegged at a 1:1 ratio, which aims to solve interoperability issues on Ethereum-compatible blockchains by allowing for ERC-20 tokens to be exchanged more easily.

wETH was introduced as an ERC-20 token on the Ethereum network for this reason, as ETH follows different rules and thus cannot be directly traded with ERC-20 tokens.

Despite the lighthearted humor behind the jokes, Dankrad Feist suggested to his 15,500 Twitter followers in a Nov. 27 tweet that the comments should be marked “more clearly as jokes,” as it “may not be obvious to outsiders.”

wETH is currently priced at $1,196, at a current ratio of 0.999:1 to ETH, according to data from CoinMarketCap.

Tether calls thesis behind USDT short-selling ‘flat out wrong’

Tether said the hedge funds that saw Terra’s collapse as a reason to short USDT have “a fundamental misunderstanding of both the cryptocurrency market and Tether.”

Tether, the issuer of Tether (USDT), says that hedge funds that attempted to short its stablecoin after Terra’s collapse in May are using a thesis that is “incredibly misinformed” and “flat out wrong.” 

In a blog post from July 28, Tether pointed to a June 28 Wall Street Journal podcast in which host Luke Vargas and guest Caitlin McCabe discussed the bearish crypto market and concerns over Tether’s backing assets as the reasons for short sellers’ appetite for Tether.

Tether said that the hedge funds, which saw Terra’s collapse as a reason to short USDT, have “a fundamental misunderstanding of both the cryptocurrency market and Tether.”

“The simple fact that hedge funds view Terra’s collapse as a constructive thesis to short USDT represents the asymmetric knowledge gap between cryptocurrency market participants and entities in the traditional finance space.”

In early May, UST lost its peg in dramatic fashion and pulled down the price of Terra ecosystem’s native token LUNA – now known as LUNC – to fractions of a cent from over $60.

In that time, Tether experienced a 21% drop in market cap since May 11 from $85.3 billion, though it is still the largest stablecoin in the crypto market today with a $65.8 billion market cap according to CoinGecko.

In late June, Tether chief technology officer Paolo Ardoino confirmed that USDT had become the subject of a “coordinated attack” by hedge funds looking to short-sell the crypto asset. 

He alleged that hedge funds have been trying to create pressure “in the billions” to “harm Tether liquidity” with the aim of eventually buying back tokens at a much lower price.

Tether in its most recent blog post noted that several misconceptions about its holdings have been the basis of this short-selling movement — including Tether holding significant Chinese commercial paper or Evergrande debt, that USDT is created “from thin air,” or that Tether has issued unsecured loans.

“In short, the underlying thesis of this trade is incredibly misinformed and flat-out wrong. It is further supported by a blind belief in what borders on outright conspiracy theories about Tether.”

In a separate post the previous day, Tether attempted to reaffirm the strength of its financial backing and ability to honor redemptions, reiterating that it holds no Chinese commercial paper and had cut its total holdings of commercial paper by 88% from $30 billion to $3.7 billion over the past year.

It added that commercial paper holdings would be as low as $300 million by the end of August, and it will hold zero commercial paper by early November.

Related: Tether fortifies its reserves: Will it silence critics, mollify investors?

The week that the UST fiasco started, USDT depegged briefly on the open market to a low of about $0.96 as investors dumped tokens either for fiat through direct redemptions or for other tokens, such as competitor USD Coin (USDC). However, Tether continued to honor fiat redemptions of $1 per token through that period.

Its last financial disclosure on March 31 revealed that 85.64% of Tether’s financial backing is in cash and cash equivalents, including commercial paper.

Tether calls thesis behind USDT short-selling ‘flat out wrong’

Tether said the hedge funds that shorted its stablecoin after Terra’s collapse have “a fundamental misunderstanding of both the cryptocurrency market and Tether.”

Tether, the issuer of Tether (USDT), says that hedge funds that attempted to short its stablecoin after Terra’s collapse in May are using a thesis that is “incredibly misinformed” and “flat out wrong.” 

In a blog post from Thursday, Tether pointed to a June 28 Wall Street Journal podcast in which host Luke Vargas and guest Caitlin McCabe discussed the bearish crypto market and concerns over Tether’s backing assets as the reasons for short sellers’ appetite for Tether.

Tether said that the hedge funds, which saw Terra’s collapse as a reason to short USDT, have “a fundamental misunderstanding of both the cryptocurrency market and Tether:”

“The simple fact that hedge funds view Terra’s collapse as a constructive thesis to short USDT represents the asymmetric knowledge gap between cryptocurrency market participants and entities in the traditional finance space.”

In early May, TerraUSD Classic (USTC) lost its peg in dramatic fashion and pulled down the price of Terra ecosystem’s native token Terra (LUNA) — now known as Luna Classic (LUNC) — to fractions of a cent from over $60.

In that time, Tether experienced a 21% drop in market cap since May 11 from $85.3 billion, though it is still the largest stablecoin in the crypto market today with a $65.8 billion market cap, according to CoinGecko.

In late June, Tether chief technology officer Paolo Ardoino confirmed that USDT had become the subject of a “coordinated attack” by hedge funds looking to short-sell the crypto asset. 

He alleged that hedge funds have been trying to create pressure “in the billions” to “harm Tether liquidity” with the aim of eventually buying back tokens at a much lower price.

Tether, in its most recent blog post, noted that several misconceptions about its holdings have been the basis of this short-selling movement — including Tether holding significant Chinese commercial paper or Evergrande debt, that USDT is created “from thin air,” or that Tether has issued unsecured loans:

“In short, the underlying thesis of this trade is incredibly misinformed and flat-out wrong. It is further supported by a blind belief in what borders on outright conspiracy theories about Tether.”

In a separate post the previous day, Tether attempted to reaffirm the strength of its financial backing and ability to honor redemptions, reiterating that it holds no Chinese commercial paper and had cut its total holdings of commercial paper by 88% from $30 billion to $3.7 billion over the past year.

It added that commercial paper holdings would be as low as $300 million by the end of August, and it will hold zero commercial paper by early November.

Related: Tether fortifies its reserves: Will it silence critics, mollify investors?

The week that the UST fiasco started, USDT depegged briefly on the open market to a low of about $0.96 as investors dumped tokens either for fiat through direct redemptions or for other tokens, such as competitor USD Coin (USDC). However, Tether continued to honor fiat redemptions of $1 per token through that period.

Its last financial disclosure on March 31 revealed that 85.64% of Tether’s financial backing is in cash and cash equivalents, including commercial paper.