© Justin Tallis / Getty Images Tether fell below $1 on Thursday as cryptocurrency markets showed signs of suffering. Justin Tallis/Getty Images - Tether briefly lost ground against the dollar on Thursday after the collapse of FTX shattered confidence in the entire cryptocurrency market.
- Tether is currently the third largest cryptocurrency with a market capitalization of nearly $70 billion.
- The stablecoin dipped to $0.98 on Thursday morning before recouping most of its losses.
Tether lost its currency against the dollar on Thursday after Sam Bankman-Fried FTX's continued internal meltdown eroded confidence in the broader cryptocurrency market.
This event is concerning as it raises fears of contagion in the cryptocurrency market as confidence declines. Bitcoin, for example, showed volatile trading, dropping more than 20% to $16,000 as a series of margin calls could wipe out much of the gains seen in the cryptocurrency markets. It has now grossed over $17,000.
Tether, the world's third-largest cryptocurrency and largest stablecoin, fell to $0.98 in Thursday morning trading before reversing most of those losses.
The stablecoin has a market cap of less than $70 billion, down 16% from a peak of around $83 billion. The fall in the cryptocurrency bear market came as concerns about Tether's balance management grew after the collapse of stablecoin TerraUSD in May.
But while Tether executives have repeatedly assured investors that their stablecoin is in fact backed by reserves at a one-to-one ratio, they continue to push for an independent audit program.
In response to FTX's failure, Tether co-founder William Quigley told CNBC on Wednesday that cryptocurrency and currency exchanges should not use highly volatile assets with debt.
"Everybody thought the big exchanges weren't vulnerable to a major crash. And again, you keep coming back to 3AC, Voyager, Celsius or Luna and it's a debt problem. Debt is toxic for cryptocurrencies".
He continued: "It violates basic principles of finance, you don't benefit from highly volatile assets." He later added: "When Wall Street entered this market last year with great success... I think one of the things that hit them was that they were impressed with their work. "
Tether CTO Paolo Arduino announced on Twitter on Thursday that the stablecoin had successfully brought in nearly $700 million the previous day. "No problem, we're on our way," he said.
In a blog post on Wednesday, Tether confirmed that it has reserves worth around $70 billion that can support redemptions. But doubts can be deferred until independent verification, leaving the possibility of breaking the stablecoin again.