Tether’s Loss Last Week Meant Gains For Other Stablecoins

For an asset often touted as reliable in a volatile cryptocurrency market, stablecoins have been remarkably unstable in the last week.

First, there was the problem with Tether. The stablecoin, which is the second-most traded cryptocurrency after bitcoin and accounts for 98% of daily trading volume in stablecoins, crashed last weekend as investors, fearful of Tether’s stability after news reports questioned Bitfinex’s solvency emerged, began shifting funds to other coins.

Cryptocurrency markets swung upwards and the price of bitcoin began trading at a premium at Bitfinex, the cryptocurrency exchange owned by the same company as Tether. According to a Bloomberg report, the difference in bitcoin prices at Bitfinex and other cryptocurrency exchanges was as much as $300.

Then, there was the reaction to prices for other stablecoins in the aftermath of Tether’s price crash. Based on reports, investors jumped ship from Tether to other coins.

For example, prices for Gemini Dollar, which is less than two months old, shot up and the cryptocurrency broke its peg with its fiat counterpart. Bibox, a cryptocurrency exchange, told online publication Coindesk that trading volume for GUSD pairs doubled even as Tether’s price declined.

As of this writing, both cryptocurrencies have stabilized and are trading at or near parity to the US dollar.

How Did Other Stablecoins Fare?

The Gemini dollar is just one example of a stablecoin ecosystem that has proliferated in recent times. According to a recent report, there were 57 stablecoins trading at various exchanges across the globe. Part of the reason why developers are rushing to release stablecoins are their multiple applications to various industries. “The low volatility of stablecoins make them appropriate for use cases including store of value, derivatives and lending smart contracts, and remittances,” authors of the report wrote.

Not all stablecoins are created equal, however.

Only select stablecoins rallied in the wake of Tether’s losses. While the Gemini Dollar rose, Goldman-backed Circle’s USDC fell slightly in tandem with Tether. The Paxos Standard (PAX) stablecoin was another winner, with its price touching $1.12 on Oct. 15th. The numbers of PAX in circulation jumped the same day. Dorothy Chang, vice president of communications and marketing at Paxos Global – the company behind PAX, announced on Twitter that the company had already sold $50 million worth of PAX coins, up from $36 million two hours earlier.

TrueUSD, another stablecoin which holds US dollars in trust accounts, also witnessed a 4% bump in its prices and an increase in trading volume post Tether’s fall. “We believe that stability is led by redeemability,” said Danny An, founder of TrueUSD in a jibe at Tether’s problems with proving its reserves. “Every time you are sure that you can take $100 worth of TrueUSD and convert it to $100 (fiat currency), then you can be sure that it (the stablecoin) will maintain its peg.”