Gus – Cryptocurrency Expert
Given Terra's depreciation, it's legitimate to question what's keeping Tether (USDT) from following in its footsteps.
Terra and USDT use different designs, procedures, and collateral. Terra was a partially collateralized computable stablecoin. It has a number of techniques for achieving stability, but they all failed in the end.
USDT has no credit risk because it is completely collateralized. Tether allows investors to swap USDT for dollars, ensuring that when the price goes below $1, they may buy USDT at a bargain and redeem them with Tether to benefit.
When there is a lot of market instability, The price of USDT may fall below or rise above $1. This does not suggest that the peg has been fractured. It denotes a higher level of liquidity than what is available on the cryptocurrency trading exchange's order books.
US treasuries currently account for more over 55 percent of total USDT reserves, while commercial paper accounts for less than 29 percent of the USD's backup. Despite the fact that both commercial paper and treasury resources are commonly referred to as cash equivalents, US treasuries have a much higher concentration of them.
The digital asset, on the other hand, is committed to reducing the quantity of commercial paper in its reserves and boosting the amount in US Treasury bonds. In the next months, new assurance opinions will reflect this.
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