If tether (USDT) is truly backed by and redeemable for physical U.S. dollars stored in company-controlled bank accounts, the so-called cryptocurrency “stablecoin” should manage to weather this period of uncharacteristic volatility until arbitrage restores its USD peg. If not, we could be witnessing the unraveling of the token that sees more daily trading volume than any other cryptocurrency, except for bitcoin.
The latest chapter in the $2.4 billion tether’s trial-by-fire will see OKEx, the world’s second-largest cryptocurrency exchange, list four USDT competitors, including offerings from industry heavyweights Gemini and Circle.
Beginning today, OKEx traders can begin depositing Gemini Dollar (GUSD), Paxos Standard (PAX), USD Coin (USDC), and TrueUSD (TUSD) into their exchange accounts. Tomorrow morning, at 14:00 HKT on Oct. 16, each USD-pegged cryptocurrency will begin trading against both bitcoin and tether. Three hours later, the tokens will be available for withdrawal.
Tether, as CCN.com reported, lost its USD peg on Monday, and — despite recovering somewhat from its intraday low — has, of the time of writing, failed to return to dollar parity despite copious opportunities for traders to profit from USDT arbitrage.
On U.S. cryptocurrency exchange Kraken, USDT traded as low as $0.85 against physical USD and continued to trade at a seven cent discount to its supposed value as of the time of writing.
With more opportunities for investors to trade tether directly against its upstart competitors, the market will finally have a chance to sort out whether tether — long the dominant stablecoin as measured by both market cap and trading volume — is as trustworthy an asset as its issuer and supporters claim. Even if critics are incorrect in alleging that Tether’s operations are not all above-board, a sustained departure from dollar parity accompanied by a loss of market share could incentivize the company — along with cryptocurrency exchange Bitfinex, with whom it reportedly shares a management team — to operate with less opacity and perhaps even undergo the long-called-for full audit of its balance sheet.
Already, PAX and TUSD have achieved daily volumes of $11 million and $27 million against tether on Binance, with each trading at a premium of at least 8 percent to USDT. GUSD and USDC are trading at similar premiums to USDT, though these markets have not seen as much volume.
Meanwhile, cryptocurrency payment processor BitPay has just announced that it will support settlements in two stablecoins, GUSD and USDC. Tether, despite its dominant market share, was excluded from the new feature.
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