Leading Stablecoin USDT Regains Peg Defying Uncertainty As Transaction Volume Soars

Updated: 20 June 2023

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After suffering a tumultuous incident last week that caused it to depart from its fixed value, USDT has finally regained its peg. The stablecoin has gone on to reach an all-time high in a surge of routine transactions which shows that the market is regaining its confidence.

USDT Depegs Due to Curve3Pool Imbalance

On June 15, Tether USDT, the most popular stablecoin pegged to the US dollar, underwent a significant detachment from the US dollar. While there are many explanations and justifications as to why the phenomenon occurred, the most prominent is the Curve3pool imbalance.

The Curve3Pool is a stablecoin pool for decentralized finance that holds a large amount of liquidity in the three top stablecoins: USDT, USD Coin, and Dai. Normally, the three assets maintain their weightage in the pool at around 33.1%.

Therefore, a significant rise in the weightage of a particular stablecoin in the pool indicates heavy selling of that asset. This was the case since on Thursday, USDT’s weightage in the Curve3pool increased to a staggering 70%.

This meant that traders were selling USDT for USDC and Dai which brought its proportion in the pool to 73.8%. The imbalance was caused by a whale address named CZSamSun which borrowed 31.5 million USDT and exchanged it for USDC.

The news of the depeg caused a lot of panic resulting in negative activity in the market. As a result, USDT realized a loss of more than $2 million, due to an increase in traders and hodlers selling their tokens as the asset’s market value fell.

Stablecoin Bounces Back to Reach New Record

However, the stablecoin has recovered and set a new record while at it. On Monday, Glassnode Alerts reported that USDT had achieved a new high in terms of transaction volume. Based on the accompanying data, the average transaction volume reached a maximum of about 50,975 USDT.

📈 $USDT Mean Transaction Volume (7d MA) just reached a 3-month high of 50,975.180 USDT

Previous 3-month high of 50,929.471 USDT was observed on 18 June 2023

View metric:https://t.co/gzMa2uBAMt pic.twitter.com/Vyqiq2hW6m

— glassnode alerts (@glassnodealerts) June 19, 2023

This was the highest volume reached in the past three months by the stablecoin. At the time of this writing, however, the transaction volume had increased even further and had surpassed 52,904 USDT.

The increased activity enabled the stablecoin to regain stability and also showed that user involvement and trade had resumed. The new record has also shown signs that the upward trend would continue.

Regardless of the recent scares, USDT has retained its position as the third-largest asset in the cryptocurrency market, behind only Bitcoin [BTC] and Ethereum [ETH]. Its market capitalization also remains unshaken and was more than $83 billion as of the time of writing.

Furthermore, USDT boasted a robust 24-hour trading volume that exceeded $14 billion. Additionally, according to Coinmarketcap, the stablecoin has kept up its leading position as the biggest stablecoin in terms of market capitalization.

Moreover, the asset seems to be on an upward trajectory as shown by the netflow of the stablecoin’s exchange. On June 18, USDT showed a considerable increase in inflows that exceeded $70,000.

This unexpected increase in the stablecoin’s supply could also be a warning that the values of other, more volatile digital assets are about to rise. According to CryptoQuant, a spike in stablecoin inflows is generally accompanied by a decline in or a rise in outflows of other crypto assets.

This pattern raises the possibility that investors are buying stablecoins to get ready for or benefit from anticipated price changes in the larger crypto market.