Tether CTO Debunks Binance’s Discount USDT Misconceptions

• Tether’s CTO has addressed a recent incident involving the world’s largest stablecoin.
• Liquidity issues on Binance.US’ platform have emerged as a key factor behind the price discrepancy.
• Ongoing legal challenges faced by Binance.US have potentially hindered market makers.

Paolo Ardoino, the chief technology officer of Tether, has stepped forward to address the recent depegging incident involving USDT, the world’s largest stablecoin in market capitalization.

USDT Dips to $0.94 on Binance.US: What Really Happened?

During the weekend, USDT experienced a momentary loss of its peg to the dollar, with its value briefly plummeting to $0.94 on Binance.US.

However, Ardoino clarifies that USDT did not actually deviate from its peg to the dollar. He attributes the price discrepancy to liquidity issues affecting Binance.US’s platform, which are unrelated to the stablecoin itself.

As the CTO of Bitfinex, a prominent cryptocurrency exchange, Ardoino explains that Binance.US is likely encountering difficulties securing sufficient market makers due to its ongoing legal challenges. This lack of market participants willing to engage in arbitrage reduces liquidity, resulting in exaggerated price volatility.

Ardoino Debunks Misconceptions About USDT Trading Below Par

Ardoino addresses misconceptions that arose overnight, suggesting that trading USDT below par on Binance.US implies a depegging of the stablecoin. He presents the following facts:

• Binance.US is currently grappling with legal challenges, thereby limiting the availability of market makers willing to arbitrage. On Binance.com, USDT is trading just one basis point above the dollar.
• On Binance.US, BTC/USD trades at $27,300, while other exchanges value it at $30,420.
• There appears to be an approximate spread of 10%.
• This situation does not imply a global devaluation of BTC. The same logic applies.
• The percentage is essentially the same when calculating the spread for BTC/USD and USDT/USD.

Meanwhile, Binance.US finds itself embroiled in a legal battle with the U.S. Securities and Exchange Commission (SEC) as it strives to protect its assets from potential seizure. The SEC initiated legal action against the crypto exchange last month, alleging the sale of unregistered securities.

On the Flipside

• Tether’s centralized control over its primary market and the role of arbitrageurs in secondary markets may contribute to potential vulnerabilities and price discrepancies.
• The broader spread between BTC/USD prices on Binance.US and other exchanges raises concerns about market manipulation and the lack of uniformity in cryptocurrency valuations, potentially impacting traders and investors seeking fair and transparent pricing.
• The ongoing legal challenges faced by Binance.US, including the lawsuit filed by the SEC, highlight the regulatory uncertainties surrounding the cryptocurrency industry and the potential risks for investors.

Why This Matters

The recent depegging incident of USDT, the world’s largest stablecoin, highlights the challenges crypto exchanges face, particularly those entangled in legal battles. Binance.US’s struggle to maintain liquidity underscores the importance of robust market infrastructure and the role of market makers in ensuring stability.

To learn more about the recent multichain exploit and subsequent $65 million freeze involving Circle and Tether, read here:

Circle and Tether Clamp Down on Multichain Exploit with $65M Freeze

To delve into how XRP whales have capitalized on price fluctuations, check out the following article:

XRP Whales Capitalize on Price Fluctuations to Tune of $570M