Tether (USDT) is a cryptocurrency algorithmic stablecoin that is pegged to the US dollar. It is completely backed by Tether’s reserves. Owing to its nature as a stablecoin, it pursues a steady valuation. Coins like USDT are usually held by investors who wish to avoid the volatility of the cryptocurrency trading market. It is the largest cryptocurrency after Bitcoin and Ethereum and is the largest stablecoin in the market.
A while ago, Tether’s price had briefly fallen to 0.96 US dollars, but shortly after, its value went up to 0.99 US dollars and eventually reached the one US dollar peg again.
BUSD is a cryptographic algorithmic stablecoin that is backed by a fiat currency and is soft pegged to the US dollar. It is a stablecoin that is issued in partnership with Binance and is founded by Paxos.
The reason behind UST fall while USDT & BUSD is maintained?
Terra (UST) was also a cryptographic algorithmic stablecoin that was soft pegged to the US dollar until May of 2022 when its price fell and it lost its peg to the fiat currency. Terra (UST) along with its sister coin LUNA, both lost their valuation exponentially. This eventually brought the whole market down. The circulation became low and the cryptocurrency market faced losses of up to millions. Many investors were affected negatively due to this crash. Large crypto companies such as Bitcoin and Binance also took a hit. The crash truly devastated everyone.
The Terra crash was so severe that not only did it bring itself down, but also brought down the largest crypto coins such as Bitcoin and Ethereum, which eventually led to the whole market crashing and caused a grave loss to more than thousands of investors.
Tether (USDT) and BUSD were two such coins that did not lose their peg (valuation) to the US dollar even when Terra (UST) lost its value very quickly. These coins remain on par with the value of the US dollar. What is the reason behind the UST fall while USDT & BUSD is maintained?
When UST and LUNA fell, many experts predicted that other stablecoins are sure to be affected due to this fall in the market. The market will be gravely hurt and stablecoins will lose their meaning and value. But, USDT and BUSD retained their value. But why is it so?
Pablo Arduino, the CTO of Tether claimed that despite the market crash, it was possible to maintain USDT’s value at 1 US dollar because it was made possible by the assets backing the stablecoin up. He also stated that in the 24 hours that followed the crash, tether was able to redeem 300 US dollars. Arduino’s statements were quite confident and powerful. This gives us reason to believe that Teacher will continue to do so shortly. He was also quick to state that Tether will never refuse redemptions to any of their customers (the only requirement is that they be verified.). This practice has been implemented until now and will also be implemented in the future. He also added that Tether already had another 1 billion US dollars ready for redemption.
BUSD is regulated and audited. It is 100 percent backed by US dollars. Since BUSD is backed by the US government, it can be said that it is the most secure stablecoin.
The main reason behind the UST fall while USDT & BUSD is maintained is that both of these crypto coins were backed by stable assets which gave them the certainty of not crashing and retaining their peg.