Metrics

Almost Every Major Stablecoin Deviated From Its $1 Peg This Week

When people talk about crypto volatility, they refer to the prices of Bitcoin and altcoins. Stablecoins should, by definition, always stay within their peg. However, this industry has no stable currency, even if fluctuations for a stablecoin like USDT or USDC have far lower implications. 

Stablecoin Fluctuations Don’t Spark Big Panic

If more people actively looked at the price deviations of stablecoins, they would notice interesting things. We have mentioned before how these assets can fluctuate like any other. For instance, a 3% move on USDT is rare, but it happens. The past week, with the FTX dumpster fire, triggered such an event. So for a while, one USDT was worth $0.97 instead of $1. 

However, volatility works both ways, even for pegged assets. There were times when one USDT had a purchasing power of $1.02 or higher. At its peak, it went to $1.05 several times. A remarkable trend, although primarily influenced by massive redemptions. There is a lot of Tether-based activity, both incoming and outgoing. 

One might think that is only affecting the largest stablecoin by market cap. However, do not be fooled, as USD Coin (USDC) saw some intriguing price swings. Although not as outspoken on the below-the-peg front, USDC spiked to $1.05 several times in a few days. However, the lower-bound peg was never in danger, giving it a more stable outlook overall. 

One of the struggling stablecoins to retain its peg is the Pax Dollar. Not because it has a large volume spike for redemptions or anything. However, the redemptions increased this past week, resulting in a brief price dip to below $0.96. That is problematic for any pegged currency, even if the situation was rectified almost immediately. 

BUSD Hits Volatility On Gemini

All examples above show the ongoing market fluctuations for stablecoins across all exchanges. However, there are intra-exchange shifts in value for stablecoins, just like there are for cryptocurrencies. In theory, that shouldn’t be too outspoken, although BUSD saw some exciting swings. It held the peg very well, but it spiked to $1.05 several times. That is a common trend among all significant stablecoins: they become worth more than the peg for some reason. 

The only notable exception to any price swings is DAI. It is also a stablecoin not backed by bank account reserves but through smart contracts. As a result, it sustained its peg rather well despite the FTX drama. The lowest point at $0.9990975 is still very close to $1. However, it never went above $1 like the other pegged currencies. That may be due to much lower usage and demand, although other factors may be at play. 


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JP Buntinx

JP Buntinx has been writing about cryptocurrency since 2012. His interest in crypto, blockchain, fintech, and finance allows him to cover a broad range of different topics.

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