What happened with USDT stablecoin?
On 15 June, a slight destabilisation appeared on the crypto-currency markets. The USDT, the world's third-largest crypto-currency in terms of market capitalisation, experienced a slight slide. The anchor value of this stablecoin, normally fixed at one dollar, fell by around 0.3% to $0.997. This situation is thought to be linked to a major imbalance in a liquidity pool weighing more than $400 million.
Understanding the role of the Curve protocol in this case
The imbalance that caused this slide is thought to have come from the 3pool belonging to the Curve protocol. This protocol, built on the Ethereum blockchain, uses liquidity pools made up of different stablecoins. These pools enable users to exchange stablecoins quickly and easily, with virtually no swap fees.
What is the Curve 3pool?
Curve's 3pool is a stablecoin pool for decentralised finance (DeFi). It holds a massive amount of liquidity from the three main stablecoins in the DeFi market: USDT, USDC and DAI. Under normal circumstances, these three stablecoins would be equally represented (33.3%) in the pool.
The 3pool imbalance: a domino effect
On 15 June, the USDT weighting exceeded 70% in Curve's 3pool, far from the ideal 33.1%. This put downward pressure on the value of the USDT stablecoin, causing it to fall and depreciate against the dollar. Faced with this problem, traders tried to rebalance the pool by buying USDT in exchange for other stablecoins, but were unable to stabilise the situation completely.
Why is this event important?
The USDT debacle could have major consequences for the crypto-currency market. The stablecoin USDT plays a central role in transactions and exchanges between different crypto-currencies, thanks to its supposed stability in the face of market fluctuations. If this stability were to be called into question, it could reduce the confidence of investors and users.
- Impact on liquidity: With an unstable USDT, traders may turn to other stablecoins to secure their positions, which could reduce the liquidity available on the market.
- Impact on DeFi projects: A large number of DeFi projects rely on the USDT to fund and operate their protocols. Depeg could call into question the viability of these projects.
- Risk of panic: Lastly, even a temporary decline in the USDT could cause investors to panic and decide to sell their USDT positions or avoid this stablecoin in the future.
What can we learn from this event?
The USDT debacle is an important reminder that, despite their apparent stability, stablecoins are not totally immune to market fluctuations. The situation has also highlighted the need for DeFi protocols to constantly monitor and adjust the parameters of their liquidity pools to avoid such imbalances.
In conclusion, it is essential for investors and users of crypto-currencies to keep a close eye on market developments and regularly inform themselves about events that could affect the value and stability of stablecoins such as USDT.
