Geoffrey Smith 

Investing.com — On Thursday, the largest stablecoin in the world fell to less than its nominal peg at 1:1 with the dollar as the market for cryptocurrencies continued to decline. 

At 2:55 AM ET (655 GMT), the price was 97.25 Cents. This is 2.5% lower than its peg. 

It was not immediately clear why Tether investors would sell their Tethers for a discounted price. In the last few days, however, crypto has been shaken by TerraUSD’s collapse and the LUNA token it is tied to. 

Contrary to TerraUSD the Bitfinex cryptocurrency exchange has maintained that Tether’s issuer and owner, TerraUSD, is fully backed by dollars reserves. TerraUSD’s value is, however, backed ultimately by a vastly diminished reserve of dollar reserves, which have fallen to a 17-month low.

As crypto enthusiasts swap their digital currencies, Tether is the most popular cryptocurrency. Its market capitalization is over $80 Billion and it’s the biggest stablecoin, even though TerraUSD lost market share in recent months.

The concern expressed by global regulators in the past is that stablecoins which make up a significant part of the cryptocurrency world, are not able to keep their promises of constant asset worth. Bitfinex released a May 2021 report showing that 2.9% of Tether’s reserve was in fact backed with cash while almost half was covered by commercial paper.

The report comes three months following Tether’s settlement with New York Attorney General Letitia James over Tether’s reserve composition. New York Attorney General Letitia James said at the time, “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.”