It is a known fact that the crypto space is now in the midst of a remarkable bear market that is yet to be bottomed out. Star crypto, bitcoin, is currently struggling to restore the last line of defense above $20,000. In such a case, the crypto market falls heavily and at the same time, stablecoins have immense strength. Mainly due to the fact that traders swap their crypto assets into stablecoins and wait until the market returns.
Ever since the algorithmic stablecoin TeraClassicUSD (USTC) has lost its peg heavily, traders are now even more cautious about stablecoins. The two events currently suggest that the bear market, now in 2022, will also affect stablecoins to a large extent.
Also read: How Long Can Bitcoin (BTC) And Ethereum (ETH) Price Hold The $20,000 And $1000 Levels?
Tether (USDT) loses 20% of its market cap in one month
The most popular stablecoin, Tether (USDT), which gained strength in the second half of 2020, has trembled heavily over the past month. Due to the USTC de-peg, traders left USDT to fall into a FUD. However, the platform burned 3 billion USDT to stabilize the peg. There is no doubt that the stablecoin has held its peg so far, but since then the dwindling market cap seems to have stabilized.
The bear market in crypto along with all the other news around big players like Terra (LUNA), Celsius Network and 3AC collapsing (likely) has forced traders to exit their positions. Moreover, external factors like inflation, Fed rate hike, global wars etc are prompting people to not only exit crypto but also exit USDT. However, as long as USDT maintains its peg, it may not reach the fate of UST.
ALSO READ: Crypto Crash Isn’t Over, Market Cap Could Drop 50%, Pushing Bitcoin (BTC) Price Near $14,000 Very Soon!
UST 2.0, USDD and USDN Crash Hard on the Horizon
The breakdown of the algorithmic stablecoin backed by volatile assets has ignited a wave of FUD among other stablecoins as well. Similar to USTC, Tron-based algorithmic stablecoin USDD lost its peg to reach the $0.95 level, while its backed asset TRX also continued to decline. There is no doubt that the platform quickly infuses some liquidity which helped the stablecoin recover a bit to trade at $0.97 at press time.
On the other hand, the Neutrino USD (USDN) which is a crypto-collateralized stablecoin pegged to the US Dollar, crashed hard at the same time. However, the stablecoin is still struggling very hard to regain its value as the asset is still trading at $0.94 after hitting the bottom of $0.916.
Collectively, the bear market is set to affect all crypto assets in the market and stablecoins are no exception. Traders may continue to exit their positions due to external pressure as the broader markets also appear to be in dire straits.
Read also: Further decoding the probability of USDD falling, how the Tron DAO is protected