Is USDT also being sold off? Curve liquidity severely imbalanced, price decoupled, Tether CTO: Welcome 1:1 redemption

According to analysis, the UST decoupling incident stemmed from an attack on the stablecoin protocol Curve's liquidity pool, causing price imbalances in decentralized exchanges, which then spread to centralized exchanges in a domino effect. Since yesterday, the large liquidity pool 3pool USDT/USDC/DAI on Curve has started to experience liquidity imbalances. As of the time of writing, there is a significant disparity with USDT accounting for up to 91%.

Decoupling Situation at Exchanges

3pool USDT/USDC/DAI:

USDT to USDC exchange rate is 1:0.96

Prices on centralized exchanges Binance and FTX are similarly decoupled:

At the time of writing, Binance price is around 0.972.

FTX price is at 0.98.

The Ever-Resilient Tether

However, Tether seems unfazed by this phenomenon. Its CTO, Paolo Ardoino, mentioned that amidst the current market FUD, a few are making money. He noted that some firms are buying USDT below $1 on Kraken and selling it on Bitfinex, or redeeming it directly from Tether at $1.

FUD is making good money to few traders.
Seeing firms buying USDt < 1$ on kraken, sell it for >= 1$ on finex or redeeming on https://t.co/fB12xESSvB for 1$. https://t.co/cj9U7u28UC

— Paolo Ardoino (@paoloardoino) May 11, 2022

"Reminder that Tether is proud to be able to redeem USDT at $1. Over $300 million USDT have been redeemed effortlessly in the past 24 hours," Paolo Ardoino stated.

However, in response to the high redemption demand, Tether has taken action. It has coordinated with third parties to conduct asset cross-chain transfers, moving $1 billion USDT from TRC20 to ERC20 and $20 million USDT from TRC20 to Avalanche. This process will not affect Tether's supply.

In few minutes Tether will coordinate with a 3rd party to perform a chain swap, converting from Tron TRC20 to Ethereum ERC20, for 1B USDt and from Tron TRC20 to Avalanche, for 20M USDt. The #tether total supply will not change during this process.

— Tether (@Tether_to) May 12, 2022

Ethereum Network Congestion

Perhaps triggered by the UST incident, the entire crypto space seems to be experiencing a flight to safety, with users rushing to convert their volatile assets to stablecoins. Ethereum's gas fees even surged to 800 gwei at one point, costing around $75 just to transfer assets.

Additionally, according to Ultrasound data, aside from asset transfers, Tether has caused the most ETH burn in the past 24 hours.