Cryptocurrency Tether drops below $1 dollar peg|Stock Catalog|CC BY 2.0
Panic in the crypto market grew intense on Thursday as Tether, the biggest stablecoin’s token value plunged below $1. The token value dropped to as low as 95 cents, trading at $0.998.
The unexpected decline came after the decrease in TerraUSD—the value plunged to below 30 cents on Wednesday, leading to a halt in Terra Blockchain for almost two hours.
What happened?
Bitcoin and other cryptocurrencies took a sharp plunge on Thursday as the rising inflation and a deterioration in the economy made investors fear the sudden decline in the crypto market value.
If you’re wondering what stablecoins are…
Stablecoins are cryptocurrencies designed to maintain a stable value (hence the name).
As cryptocurrency prices dropped this week, stablecoins were supposed to be unaffected. But the unexpected decline in TerraUSD—breaking from the 1:1 dollar peg—has questioned the stability of the, umm… Stablecoin.
What you need to know
Stablecoin tries to maintain a constant exchange rate with currencies, for example, through a 1:1 U.S. dollar peg.
