The market at the beginning of August is facing challenges as the price of Bitcoin (BTC) continues to decline, and rumors related to the Huobi exchange have triggered a significant sell-off of the cryptocurrency USDT.
Data from CoinmarketCap shows that the USDT/USD exchange rate has been fluctuating below $1 since July 24, and up until now, the price of USDT has remained below this level for two consecutive weeks. This situation has raised concerns as a sharp sell-off of USDT is often not good for the overall market. Similarly, during the end of 2022, the market decline was accompanied by a strong sell-off of USDT, and currently, the level of USDT’s decline is similar to that period.
Although USDT has lost value against the USD, it still maintains the stability of a stablecoin, with the current price at $0.998.
While USDT is facing difficulties, Tether has still achieved significant profits in Q2/2023 and has decided to use a portion of these profits to supplement its surplus reserves. Additionally, Tether and Bitfinex have also won comprehensive legal victories as a US District Court dismissed a class-action lawsuit against the company.
However, there are suspicions that two major selling pressures might be the cause of the slight “peg loss” of USDT. Some speculate that a new stablecoin called FDUSD might be benefiting from the selling pressure on USDT. Although Tether’s CTO did not provide specific evidence for this situation, there is a feeling that this could be a possibility.
Before Adam Cochran made his arguments about the possibility of Huobi’s insolvency, the sell-off of USDT had already occurred. But afterward, the selling pressure on USDT intensified. Adam believes that senior personnel at Huobi are being investigated by the Chinese police, but he did not provide concrete evidence for these claims. He also suggests that Huobi only has $90 million in reserves instead of the $631 million announced. Furthermore, he mentions that Justin Sun attracted USDT by staking it to obtain stUSDT to aid liquidity, and this led to a “bank run” on Binance before users discovered the truth, causing the price of USDT to drop.
Despite the difficulties faced by USDT, the price of Bitcoin remains unaffected, and USDT only experienced a slight “peg loss” within an acceptable range. This demonstrates the resilience of USDT in challenging situations.