Tether Price Prediction: Will USDT Survive the UST Meltdown?

Summary:
• What is the outlook of the Tether price prediction? We explain whether USDT will survive the UST meltdown and what next.

Investors have been focusing on the Tether price after this week’s implosion of Terra USD. The USDT price dropped to a low of $0.9910, which was the lowest level since December last year. Its performance signals that investors fear contagion risks after UST crashed hard this week. In this article, we will look at whether there are risks that the coin will keep crashing as well.

Will Tether crash?

Tether is a stablecoin that is substantially different from algorithmic coins like Terra USD, Neutrino, and USDD. The coin is backed by real assets like the US dollar, government bonds, and commercial paper. On the other hand, the latter three coins are algorithmic in nature, which means that people arbitrage their positions.

Recently, there have been concerns about algorithmic stablecoins. The main concern happened a few months ago when Neutrino lost its peg. This week, these worries accelerated as Terra USD imploded, pushing its price to less than 25 cents. This means that people who had a dollar in UST now had just 25 cents.

There have been concerns about Tether for a long time. Indeed, the developers were forced to pay $42.5 million by the CFTC in 2021. In this period, analysts have cautioned the fact that the stablecoin is not backed by real dollars as claimed. Instead, some of its reserves are backed by commercial paper and treasuries. 

The management has insisted that generating a return from these investments makes sense instead of letting the cash lose value to inflation. In a statement last month, Tether’s CEO said that the company was seeking to reduce their commercial paper holdings.

Tether price prediction

Tether holders are right to be worried about their holdings after the Terra USD crashed. This explains why the coin dropped by as much as 0.94% from its peg level of $1. The same explains why the recently launched USDD stablecoin has also declined to 98 cents. However, it is worth noting that the USDT coin has had similar declines in the past.  

This means that the coin has stronger chances of moving back to parity in the longer term. But as stablecoin worries remain, there is a possibility it will continue being under pressure.