{"id":46617,"date":"2022-05-12T15:28:40","date_gmt":"2022-05-12T15:28:40","guid":{"rendered":"https:\/\/packetstormsecurity.com\/news\/view\/33439\/Turmoil-In-Crypto-Market-As-Stablecoin-Tether-Breaks-Dollar-Peg.html"},"modified":"2022-05-12T15:28:40","modified_gmt":"2022-05-12T15:28:40","slug":"turmoil-in-crypto-market-as-stablecoin-tether-breaks-dollar-peg","status":"publish","type":"post","link":"https:\/\/www.threatshub.org\/blog\/turmoil-in-crypto-market-as-stablecoin-tether-breaks-dollar-peg\/","title":{"rendered":"Turmoil In Crypto Market As Stablecoin Tether Breaks Dollar Peg"},"content":{"rendered":"
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Shockwaves swept through cryptocurrency markets on Thursday as tether, the largest \u201cstablecoin\u201d and a foundational part of the digital asset ecosystem, broke its peg to the dollar in the latest blow to the struggling sector.<\/p>\n

Bitcoin and ethereum, the two biggest cryptocurrencies, shed 5% and 12% respectively, extending losses that have seen both fall more than 20% over the past week. Losses have been even bigger for the smaller players, with dogecoin falling 10% on Thursday and 35% over the week.<\/p>\n

The losses came as tether traded at less than $0.98 for the first time in two years on Thursday morning, prompting it to assure investors it was still capable of honouring withdrawals at par.<\/p>\n

Like all stablecoins, tether is intended to only ever trade at a fixed value relative to a conventional currency: one tether token is always supposed to be $1.<\/p>\n

A stablecoin, like the name suggests, is a type of cryptocurrency that is supposed to have a stable value, such as US$1 per token. How they achieve that varies: the largest, such as tether and USD Coin, are effectively banks. They hold large reserves in cash, liquid assets, and other investments, and simply use those reserves to maintain a stable price.<\/p>\n

Others, known as \\"algorithmic stablecoins\\", attempt to do the same thing but without any reserves. They have been criticised as effectively being backed by Ponzi schemes, since they require continuous inflows of cash to ensure they don’t collapse.<\/p>\n

Stablecoins are an important part of the cryptocurrency ecosystem. They provide a safer place for investors to store capital without going through the hassle of cashing out entirely, and allow assets to be denominated in conventional currency, rather than other extremely volatile tokens.<\/p>\n

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\nQ&A<\/span><\/p>\n

What is a stablecoin?<\/h4>\n

<\/svg><\/span>Show<\/span><\/span><\/summary>\n

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A stablecoin, like the name suggests, is a type of cryptocurrency that is supposed to have a stable value, such as US$1 per token. How they achieve that varies: the largest, such as tether and USD Coin, are effectively banks. They hold large reserves in cash, liquid assets, and other investments, and simply use those reserves to maintain a stable price.<\/p>\n

Others, known as “algorithmic stablecoins”, attempt to do the same thing but without any reserves. They have been criticised as effectively being backed by Ponzi schemes, since they require continuous inflows of cash to ensure they don’t collapse.<\/p>\n

Stablecoins are an important part of the cryptocurrency ecosystem. They provide a safer place for investors to store capital without going through the hassle of cashing out entirely, and allow assets to be denominated in conventional currency, rather than other extremely volatile tokens.<\/p>\n<\/div>\n<\/div>\n