Curve pool imbalance triggers USDT depeg concerns, Tether CTO calls it FUD
The stablecoin pool ideally has a weightage of 33.3% of USDT, USDC and DAI; however, on June 15, the USDT weightage rose above 70% in the pool.
The Tether (USDT) stablecoin slightly deviated from its United States dollar peg on June 15 due to an imbalance in Curve’s 3pool. The price of USDT fell by 0.3% to around 0.997 as its weightage in the curve 3pool increased to over 70% from the usual 33.1%.
Curve’s 3pool is a stablecoin pool for decentralized finance holding a massive amount of liquidity in the three top stablecoins: USDT, USD Coin (USDC) and Dai (DAI). A significant rise in the weightage of a particular stablecoin in the pool indicates heavy selling of that asset.
With USDT weightage at around 73.8%, traders are increasingly selling USDT for DAI or USDC. USDT concentration in Curve’s 3pool previously exceeded 50% in November 2022 at the time of the FTX collapse.
The main cause of the imbalance was attributed to a whale address called CZSamSun that borrowed 31.5 million USDT and swapped it for USDC, leading to a slight deviation in USDT’s U.S. dollar peg value. With the help of 17,000 Ether (ETH) and 14,000 stETH as collateral, the address converted the borrowed sum into USDC using the 1inch Network.
The borrower then made deposits to v2 and v3 totaling $10 million and $21 million, respectively. Following that, the borrower took out a USDT loan of 12 million from v3 and deposited it into v2.
Approximately 20 minutes after czsamsun.eth borrowed USDT, another address (0xd2…0701) mortgaged 52,200 stETH through Aave V2 and borrowed 50 million USDC. Using the USDC>USDT de-peg, with a few million USDC,
The slight deviation for USDT price helped the USDC/USDT trading pair on Binance to rise to a new yerly high of $1.0034. USDT accounted for 73.79% of Curve 3pool, DAI accounted for 13.05%, and USDC accounted for 13.16%.
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Tether’s chief technical officer Paolo Ardoino took to Twitter to assure the crypto community that the de-peg scare is nothing to worry about and they are ready to redeem any amount. Later Ardoino also shared a „FUD meme“ as well addressing the market rumours around Tether depeg.
— Paolo Ardoino (@paoloardoino) June 15, 2023
The latest stablecoin de-peg scare comes within months of the USDC depeg that ran havoc on many investors‘ portfolios. The USDC depegged below $0.9 in March earlier this year as Circle confirmed they had over $3 billion stuck with Silicon Valley Bank. Although Circle managed to gather enough capital to repeg USDC value to the dollar within two days, the panic set in by the de-pegging led to many traders exiting USDC at a loss.
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