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Tether Under Pressure After Terra’s UST Lost its Dollar Peg

The past four days have been notably turbulent in the cryptocurrency markets. Headlines have been dominated by the collapse of Terra’s LUNA after its UST stablecoin lost its peg to the U.S. dollar. At the same time, the largest dollar-pegged stablecoin, Tether (USDT), has also come under pressure. Key points:

  • Recent data show Tether liquidations have risen as part of a broader crypto market crash.

  • USDT has fallen about 4.8% against the dollar over the past 24 hours.

  • This is the weakest level for Tether against the dollar in roughly five years.

Data source: TradingView

Is Tether (USDT) following UST’s collapse?

Tether (USDT) is the largest dollar-pegged stablecoin by market capitalization, currently around $81 billion. That scale can create a sense of stability, but nothing in crypto is guaranteed. When Terra’s UST lost its dollar peg, the dramatic decline reverberated across markets and triggered widespread selling and liquidation events.

UST has partially recovered and is trading around $0.60. Still, the recent turmoil has clearly shaken confidence in dollar-pegged stablecoins, and that erosion of trust appears to be affecting Tether as well. USDT has slipped roughly 4.8% versus the dollar.

At one point in the past 24 hours, Tether traded at its weakest level against the dollar in about five years. If market stress continues, investors may increasingly redeem or sell USDT holdings, which could place additional pressure on Tether’s ability to maintain a strict 1:1 peg.

Should investors be worried?

Cryptocurrency markets have endured multiple major crashes before, and while the current picture looks concerning, past recoveries show that markets can stabilize over time.

However, downside risks related to Tether have clearly risen. Given the current environment, it would not be surprising to see further deviations from the 1:1 dollar peg in the near term. Investors should monitor market conditions, liquidity metrics, and official communications from Tether closely, and consider appropriate risk management measures for their portfolios.