USDT loses parity with the dollar and reached 95 cents. Terra USD effect?

Key facts:

The stablecoin was worth $0.95 for a couple of hours and still hasn’t reached its ideal value.

The developer company did not provide explanations about what happened yet.

In the early hours of today, Thursday, May 12, 2022, the stable cryptocurrency or stablecoin Tether (USDT) lost its parity (peg) with the US dollar. It traded at $0.95 and at the time of writing this article had risen to $0.98.

According to data from CoinMarketCap, the disparity of USDT with its underlying asset occurred andn a period of two hours in the early morning of May 12. This peg is essential for the stablecoin, so named precisely because its primary objective is to prevent traders from being exposed to the volatility of other crypto assets such as bitcoin (BTC) and ether (ETH).

This is what the USDT movement looks like on the daily chart of the value of the cryptocurrency. Source: CoinMarketCap

Until the time of publication of this article, the developer of the stablecoin, Tether, has not given explanations about this movement in the price of the cryptoactive.

On his Twitter account, there is only a notice about emissions and chain changes that have already been seen in the past and that do not usually have an effect on the value of the token. A few minutes ago, in addition, explanatory videos about the differences between the different types of stablecoins were published on the Tether account.

Tether published a technical notice during the early hours of Latin America, but its price has not been affected by this in the past. Source: Twitter @Tether_to

The reaction of the stablecoin USDC

While USDT tries to recover and reach the value of USD 1 again, the stablecoin developed by Circle USD coin (USDC) had a slight upward movement. Its price remains unchanged at one dollar, but in the graph below you can see how it rose a fraction of a penny to $1,008, in a movement that had not occurred in the last 12 months.

Unlike USDT, USD coin had a minimal increase in its value. Source: CoinMarketCap

All this happens in a context of FUD (fear, uncertainty and doubt) regarding stablecoins and the funds that support their issuance. The case of terra USD (UST), the stablecoin that lost almost 80% of its market value in three days this week, as reported by LogitechGamingSoftware, ignited the debate about these cryptocurrencies and their true security for users.