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Tether Stablecoin Recoups Lost Market Value in 2022 Crash

Tether, the largest stablecoin issuer in the market, has seen its market capitalization hit a new record high, exceeding $83.2 billion.

  • This comes after Tether’s stablecoin recovered all of the roughly $20 billion in market value it lost following the collapse of algorithmic trading firm, Archegos Capital Management, in 2022.

The recovery of Tether’s market value is a positive sign for the cryptocurrency market,

as it indicates that investors are regaining confidence in stablecoins.

Tether Stablecoin؛ a new record high, exceeding $83.2 billion

The stablecoin (USDT), which is pegged at one-to-one with the U.S. dollar and is backed by reserves of cash and cash-equivalent assets,

has recovered the $20 billion in market value it lost following the collapse of rival stablecoin TerraUSD last year.

“Today’s numbers demonstrate that people want access to financial freedom, and when given that access, they will make use of it”

“Between our battle-tested resilience in the face of market volatility and our industry-leading transparency practices, Tether has proven that it can be trusted, and customers are responding in kind.”

Paolo Ardoino, CTO of Tether, said in a statement.

The instability that rocked the crypto market last year saw Tether,

as well as other major stablecoins, lose a large share of their market cap as investors started exiting the market amid increased uncertainty.

While Tether has managed to recover the market value it lost last year, other stablecoins have not been this successful.

For instance, USD Coin (USDC), the second-largest stablecoin, currently has a market cap of around $29 billion,

far less than its all-time high record of over $56 billion, according to data by CoinGecko.

According to researchers at Kaiko, Tether is used in more than 50% of all trades on centralized exchanges.

How does Tether maintain its peg to the US dollar

Tether maintains its peg to the US dollar through a combination of methods:

  • including holding reserves of US dollars,
  • managing the supply of USDT,
  • and redeeming USDT for US dollars.

Tether claims that every USDT is redeemable for dollars via Tether,

and as such, any time the price goes below $1, investors can redeem their USDT for US dollars.

Tether has over $70 billion dollars of collateral,

which it can redeem USDT against, and no exchange’s order book has anything remotely resembling that amount of liquidity.

When the demand for USDT increases, Tether can issue more USDT to meet the demand,

and when the demand decreases, Tether can buy back USDT to maintain the peg.

However, Tether’s peg to the US dollar has been challenged in the past,

with USDT dropping below its intended $1 peg due to market volatility and panic in the crypto market.

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