In a surprising turn of events, the DeFi sector is grappling with a significant imbalance in the Tether (USDT) stablecoin on platforms like Curve and Uniswap. Recent reports from Kaiko have highlighted the imbalance, but sources indicate that heavy USDT selling commenced at the start of July.
Tether Imbalance Sending DeFi Market Into Turmoil
The worrisome situation has developed in the wake of the Curve exploit, which shook the DeFi industry and led to the repatriation of more than 70% of the missing money.
The concern is mostly focused on Curve’s 3pool and Uniswap V3’s main USDT-USDC pool, both of which have become unbalanced as a result of increased USDT selling, Kaiko’s report stated. Mid-July saw a major $100 million net selling on Uniswap between July 15 and July 22, which is when this problem first started. Despite selling having decreased in the weeks that followed, it resumed on July 31st in response to the Curve exploit. It’s important to note that these two incidents don’t seem to be connected.
The selling pressure has been evident, with Uniswap experiencing around $40 million in net selling and Curve facing roughly $35 million. At present, the Curve pool is precariously skewed, with a hefty 60% in USDT holdings. This situation has reverberated onto centralized exchanges, causing a slight dip in USDT’s peg to the US dollar over recent days.
The rationale behind traders offloading USDT remains elusive, as no clear bearish catalyst has emerged. Counterintuitively, Tether recently disclosed substantial Q2 revenues. Tether’s Chief Technology Officer (CTO) has alluded to the possibility of foul play, suggesting a potential link between the selling and the listing of the new stablecoin FDUSD on Binance, issued by Hong Kong-based First Digital. However, this theory lacks concrete evidence tying the two events together, Kaiko’s report stated.
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Is FDUSD Listing To Be Blamed?
Despite Binance’s concerted efforts, FDUSD has struggled to gain momentum since its listing, even with the introduction of zero-fee trading pairs. Although initial volumes briefly spiked to over $200 million, they quickly tapered off to around $30 million.
The tepid response to the zero-fee FDUSD pairs is somewhat unexpected, given the historical impact of such promotions on trading activity. This hesitancy among traders underscores the enigmatic nature of the ongoing heavy selling and further underscores the intensifying competition in the stablecoin arena. The implications of the imbalance and its ripple effects on the DeFi landscape remain to be seen.
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