The crypto economy has suffered two major crypto failures this year: the collapse of Luna/TerraUSD in May and the failure of FTX in November. In both instances, the world's largest stablecoin, Tether, was caught in the blast radius as waves of redemptions poured into the company. It shrunk by $18 billion, or 21%, in May and June and by another $4 billion, or 6%, in November.
Stablecoins shouldn't be the instruments that the public sells in a panic. They're supposed to be the opposite; the life vest that people grab on to. Competing stablecoins USD Coin and Binance USD performed as one would have expected. Neither experienced a barrage of redemptions during these two episodes.
Here are four things that Tether can do to ensure that the next time the crypto economy undergoes a shock, tether stays steady.
- Tether needs to get rid of its corporate bonds, funds and "other investments."
- Tether needs to cancel its 0.1% redemption/withdrawal fee.
- Tether needs to open redemptions up to more people by removing its $100,000 floor.
- Tether needs to be more transparent.
(by JP Koning)
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