Tether, the USD pegged stablecoin, touched one dollar mark today briefly after almost two weeks of turmoil. The stablecoin had been hit by a storm of cash-outs that made the ship sink below the one dollar mark.
As reported by BlockPublisher earlier, questions were raised at the characteristics of the stablecoin that was supposed to have a 1:1 with USD but was revolving around 98 cents. A domino cash-out was initiated by investors that were moving their stocks to coins ‘that were actually stable’. This caused a price crash of Tether, taking it as far as to 92 cents.
Since then, Tether has slowly made its way to the one dollar mark, succeeding briefly only today.
To keep the 1:1 ratio, Tether Ltd. destroyed $500 million worth Tether that were out of circulation. First, Tether Ltd. sent the coins from its treasury to another address and as soon as it was confirmed, revoked the coins effectively killing them off.
This may sound confusing but is perfectly legal and also stated in the Tether White Paper.
‘The main concept is that Tether Ltd. is the only party who can issue Tethers into circulation (create them) or take them out of circulation (destroy them). This is the main process by which the system solvency is maintained.’ — Tether White Paper
The last time Tether saw above the one dollar mark was earlier this month, on October 15.
The worries for Tether are not over yet as their USD backed claim is often questioned since the company has never released audit reports that confirm that they have enough USD reserves to issue more USDT.