Tether Drama Increased Demand for Other Stablecoins
The prices of stablecoins went into a frenzy following the news of Tether’s current legal troubles, with most of them jumping - as much as stablecoins can jump - and are currently among the very few coins in green in terms of price. These jumps range from 0.45% in the case of the Gemini Dollar (GUSD), to 2.06% for TrueUSD (TUSD).
As Tether is the largest stablecoin currently in the market by far, with a current market capitalization of around USD 2.8 billion, its current predicament was sure to bring about trouble for the whole market. As many cryptocurrency exchanges are unable to offer fiat-to-crypto trading due to regulatory issues, stablecoins - most often Tether - act as the fiat component to combat the volatility of other assets.
However, after New York’s Attorney General said that major cryptocurrency exchange Bitfinex and stablecoin Tether engaged in a cover-up after losing about USD 850 million of client and corporate funds, people are looking for an acceptable alternative, which also means dipping into other stablecoins. This also triggers age-old supply and demand laws, bringing the price of other stablecoins to slightly above one dollar. Even though the difference is in a cent or two, it’s quite noticeable in a red market.
Interestingly, two stablecoins, Tether excluded, have also fallen: BitUSD (BITUSD) and Dai (DAI), by 0.5% and 0.7% respectively. The former is still above USD 1, while Dai is the only one struggling at USD 0.97 as of the time of writing. However, Dai’s problems may well be attributed to instability within the team, according to multiple media reports, as a potential lawsuit could be threatening its parent company. Meanwhile, the company is also looking to increase DAI fees above 15% in an attempt to stabilize the coin.