Tether Price Dips Below $1 as FTX Fallout Continues to Roil Markets

Tether’s USDT token, the largest stablecoin by market value, veered off its dollar-peg on Thursday as market instability continued to roil the crypto sector and the issuer froze some coins in the wake of FTX’s collapse.

Tether dips below $1 as FTX fallout continues. (REUTERS)

Tether's USDT token, the largest stablecoin by market value, veered off its dollar-peg on Thursday as market instability continued to roil the crypto sector and the issuer froze some coins in the wake of FTX's collapse.

USDT slipped as much as 4% to around 96 cents, according to pricing data available on Bloomberg. Other major stablecoins, including Circle's USDC, Binance's BUSD and MakerDAO's DAI, were broadly flat or trading at a slight premium.

The issuer also sought to freeze a pile of USDT tokens, subject to an active investigation by law enforcement. The hoard, worth roughly $46 million, were in a wallet owned by FTX, crypto news site CoinDesk reported. A Tether spokesperson declined to comment on the specifics, but said the firm has open dialog with authorities including the US Department of Justice.

Tether has become a bellwether of crypto risk appetite during periods of market stress, struggling to maintain its peg to the dollar. The token slumped as low as 94.55 cents during the collapse of the Terra ecosystem in May, and lost around $18 billion from its total circulation over the months that followed. Traders use the tokens as a source of liquidity and to shelter funds during wide price swings.

Meanwhile Tether's share on Curve's 3pool, a platform where users can swap USDT for USDC or DAI stablecoins, became imbalanced as traders rushed to offload their USDT tokens for other assets. USDT now makes up nearly 80% of the pool, compared 9.8% for USDC and 10.8% for DAI, compared to the pool's usual even three-way split.

The amount of funds deposited in Tether have rebounded since the Terra collapse as crypto volatility eased, but redemptions began to start again in earnest this week as the broader market swung wildly. The price of Bitcoin has declined around 17% this week, while Ether declined 19.3%.

Paolo Ardoino, Tether's chief technology officer, said in a tweet that the firm had processed around $700 million in redemption requests in the last 24 hours.