USDT, the largest stablecoin in the crypto industry, has experienced a depeg throughout August. This means that its value in relation to the U.S. dollar has deviated. Kaiko analyst Riyad Carey introduced a new metric called “depeg severity” to measure stablecoin depegs based on trading volume. According to the report, other stablecoins like TUSD, BUSD, DAI, and USDC were relatively more stable and less sensitive to deviations from the U.S. dollar.
The most severe incident for USDT occurred on August 7 when it traded at a 2% discount compared to its $1 peg. This depegging event followed reports of significant net selling of USDT across major exchanges. Carey suggests that USDT’s redemption fee and minimum requirements contribute to its peg stability problem. He recommends removing the redemption fee and minimum to address the issue. Currently, Tether charges a 0.1% fee for fiat withdrawals over $1,000, with a minimum withdrawal or deposit set at $100,000.
The consistent discount of USDT is cause for concern as it could erode trust if it continues. Carey emphasizes that the depegs are not significant in price terms, but the consistency of the discount is worrisome. Tether and Kaiko did not respond to requests for comments.
Hot Take: USDT’s depegging events and consistent discount raise concerns about its peg stability. Removing the redemption fee and minimum requirements could be a potential solution to address this issue and maintain trust in the stablecoin.
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