Last week, Tether was trading at around 95 cents, which is 5% below the $1 market level it aims to reside at. This has increased fears about the state of the wider cryptocurrency market.
Since Mid-May, the market value of stablecoin Tether has dropped by 9 percent, down to $76bn. This is partially due to the removal of some tokens from circulation to meet redemption requests.
Although stablecoins are designed to hold a one-to-one peg with the US dollar, there have been warnings from both inside and outside of the crypto market that stablecoins look to be increasingly volatile as they lower the value of thousands of potential crypto assets which have interested customers worldwide.
An executive board member at the European Central Bank, Fabio Panetta, said: “There is no guarantee that [stablecoins] can be redeemed at par at any time – just last week the world’s biggest stablecoin temporarily lost its peg to the dollar.
“It is an illusion to believe that private instruments can act as money when they cannot be converted at par into public money at all times.”
Panetta also mentioned that stablecoin holders can not at this point claim deposit insurance for any losses and that operators are unable to access several banking facilities. This leaves some crypto tokens vulnerable and particularly volatile.
