Tether, the largest “stablecoin” and a foundational part of the cryptocurrency ecosystem, is at risk of a bank run after breaking its peg to the dollar amid the sector’s worst crash in years.
The cryptocurrency traded at less than $0.98 (82p) for the first time in two years on Thursday morning, prompting its chief technology officer, Paolo Ardoino, to tweet reassurances to investors that it was still capable of honouring withdrawals at par.
Like all stablecoins, tether is intended to only ever trade at a fixed value relative to a conventional currency: one tether token is always supposed to be $1.
However, on Monday another prominent stablecoin, terra, broke its peg to the dollar and has slumped since, now trading at barely half its supposed stable value. That event appears to have precipitated a wider crash, with even the blue-chip cryptocurrencies plummeting over the past week.
Bitcoin and ethereum are both down 30% in the past seven days, with smaller cryptocurrencies such as ripple, solana and dogecoin falling more than 40%. Binance, one of the largest US cryptocurrency exchanges, suspended deposits and withdrawals on Thursday from 11.30am for what it said was scheduled maintenance.