Knowledge

Tether and UST, what is the difference between these two stablecoins?

The collapse of Terra USD has damaged the reputation of stablecoins and the broader crypto industry. But in an effort to distance itself from the fallout, Tether says it’s different. With investors still hurting from the UST disaster, USDT attempts to reassure them that it is different.
Billions of dollars were wasted in the Terra debacle, the consequences of which will be felt for years to come. Can Tether, on the other hand, restore market confidence?

Tether notes in a recent blog post that, as a collateralized stablecoin, it “has nothing in common” with UST, which relies on an algorithm to keep its dollar peg. In the instance of USDT, collateralized means that the token is backed by assets such as dollars and cash equivalents.

“While UST is referred to as a stablecoin, it has nothing in common with collateralized stablecoins like Tether USD₮. UST is an algorithmic stablecoin.”

According to the blog post, despite the years of instability in Bitcoin (BTC), USDT has remained the ‘primary form of dollar-based liquidity.’

It goes on to say that, being a collateral-based stablecoin, USDT holders can exchange their tokens for dollars 1:1. And the corporation has always been able to pay its redemption commitments since its beginning.

“Since 2015, Tether has never failed to process a redemption request for USD₮ at a value of $1 per USD₮ token.”

Tether (USDT) – The world’s first stablecoin

While USDT exchange rates may fluctuate from time to time, there is no risk of de-pegging as long as Tether may redeem tokens at face value.

The post went on to criticize algorithmic stablecoins, claiming they had a terrible track record and several examples of failure. It also quoted a University of Calgary research that characterized them as naturally frail and vulnerable.

USDT deviated significantly below its $1 peg price on May 12. The USDT price fell as low as $0.9409 on that day, sparking fear in markets already hurting from the UST crash.

Nonetheless, in a Twitter Spaces chat later that evening, Bitfinex CTO Paolo Ardoino addressed the issue by reiterating the technical differences between collateralized and algorithmic stablecoins.

Ardoino went on to say that even amid the panic selling, Tether has enough liquidity to honor redemptions at $1. As a result, notwithstanding the variations in currency rates, there was never a difficulty.

Soon after the public address, USDT was restored to its peg price.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join CoinCu Telegram to keep track of news: https://t.me/coincunews

Follow CoinCu Youtube Channel | Follow CoinCu Facebook page

Harold

CoinCu News

Harold

With a passion for untangling the complexities of the financial world, I've spent over four years in financial journalism, covering everything from traditional equities to the cutting edge of venture capital. "The financial markets are a fascinating puzzle," I often say, "and I love helping people make sense of them." That's what drives me to bring clear and insightful financial journalism to the readers of Coincu.

Recent Posts

Bitcoin Spot ETF Inflows Reach $449M With BlackRock Leading

Key Points: Bitcoin Spot ETF Inflows totaled $449M, led by BlackRock’s $1.45B contribution. Ethereum Spot…

37 minutes ago

Best New Meme Coins to Join for 2025: BTFD Coin Leads, Popcat Keeps It Purr-fect, and Non-Playable Coin Hits Gamers Hard

Discover the Best New Meme Coins to Join for 2025. BTFD Coin's price rollback offers…

2 hours ago

Solana memecoins crash while DTX Exchange hits 100,000 TPS on layer-1 blockchain

Discover how DTX Exchange's historic achievement of 100,000 transactions per second on a layer-1 blockchain…

3 hours ago

Strategic Bitcoin Reserve Expected to Cut 35% of US National Debt by 2049

VanEck suggests the U.S. could reduce its national debt by 35% by 2050 through a…

3 hours ago

The New Lead of Presidential Crypto Council Appointed by Trump Is Bo Hines

President-elect Donald Trump named Bo Hines as the executive director of the presidential crypto council.

3 hours ago

Best New Meme Coins with 1000X Potential: BTFD Coin’s Hot BIG50 Discount As Baby Doge Coin, Dogs Takes Gaming to the Next Level

Explore the best new meme coins with 1000X potential. Learn how BTFD Coin leads with…

4 hours ago

This website uses cookies.