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USDT Faces Liquidity Crisis as Curve 3Pool Becomes Imbalanced

USDT Faces Liquidity Crisis as Curve 3Pool Becomes Imbalanced

Jun 16, 2023
| Issue

Hi all! Welcome to another Datawallet newsletter, your go to spot for all crypto related news, gossip and announcements. Regardless of your knowledge level, here you will find everything you need, so sit back and enjoy the ride. 

Today’s drop will cover these key daily news items:

USDT Liquidity Crisis as Curve 3Pool Becomes Imbalanced

Tether's USDT, the leading stablecoin with a market cap of $83.4 billion, is witnessing a potential liquidity crisis as large amounts of USDT are being sold in two prominent liquidity pools - the Curve 3pool and Uniswap v3 USDC/USDT pool. With USDT's share in the Curve 3pool soaring from 22% to over 50% within three days, leading to a net $120 million inflow, the selling spree could trigger a rapid depeg, reminiscent of USDC's fall during the Silicon Valley Bank collapse. The situation is compounded by the possibility that a lack of liquidity, particularly in the Uniswap v3 pool, could accelerate a depeg, which could send shockwaves through the crypto economy.

Amidst the current selling activity, observers speculate that Tether might be heading towards trouble, although there's no concrete evidence yet. Critics have long scrutinized Tether for its opaque reserve practices, where it asserts its USDT is backed by equivalent assets like cash and bonds, but has not provided a comprehensive audit. A disruption with Tether, especially during an already challenging time marked by SEC's aggressive regulatory actions, might precipitate a crisis within the crypto sector. The CFTC and SEC's interest in stablecoins and the negative impact of USDC's depeg in March have increased fears about a systemic meltdown in the crypto industry, in the event of an issue with Tether.

EigenLayer Restaking is now Live

EigenLayer, the Ethereum staking protocol, has successfully launched on Ethereum mainnet, marking a significant milestone in enabling restaking. For the Stage 1 launch, the functionality mirrors what has been tested on the Goerli testnet since April 6, 2023, allowing Ethereum stakers to securely manage their liquid staking tokens and self-direct their funds. The launch is guarded, with restaking limits in place for each supported asset including Lido stETH, Rocket Pool ETH, and Coinbase Wrapped Staked ETH, to ensure protocol security.

EigenLayer has also undergone extensive third-party security analyses and offers a substantial $2M bug bounty via Immunefi. As the protocol matures, EigenLayer aims to foster a decentralized network, involving an iterative approach designed to support permissionless growth and development of restakers, operators, developers, and the Ethereum ecosystem as a whole.

Markets drop after Fed leaves rates unchanged

The Federal Reserve, after consistently increasing rates for over a year, decided to keep the rates stable in the range of 5% to 5.25% today. 

Following this news, Bitcoin and Ether, the most significant digital currencies, experienced a significant dip in their trade values. Bitcoin's value diminished by more than 3%, and Ether's value declined by 5%. Approximately two hours after the rate announcement, a widespread sell-off occurred.

Delio freezes withdrawals

Delio, a South Korean fintech company specializing in digital asset savings and loans, has temporarily halted withdrawals in a bid to safeguard the assets of its remaining clients. The company, in a translated website announcement, stated that it was compelled to temporarily pause withdrawals from June 14 due to a significant surge in market instability and growing investor uncertainty.

Colombia taps Ripple

The Central Bank of Colombia, Banco de la República, has teamed up with blockchain company Ripple for investigating the potential applications of blockchain technology. Ripple has stated that, in collaboration with the Ministry for the Information and Communications Technologies (MinTIC), Banco de la República is planning to test Ripple's CBDC platform to enhance its high-value payment system. This venture is a segment of a blockchain testing phase being carried out by MinTIC.

BlackRock close to filing for Bitcoin ETF

BlackRock, the globe's largest asset management firm, is on the verge of submitting an application for a Bitcoin ETF (exchange-traded fund), as per an individual who is knowledgeable about the issue. BlackRock plans to use Coinbase (COIN) Custody for the ETF and will reference the crypto exchange's spot market data for determining prices, according to the individual. Coinbase chose not to provide a comment. BlackRock initiated collaboration with Coinbase to offer crypto directly to institutional investors around the middle of the previous year.

Other breaking news

  • Hashflow exploit
  • South Korean banks gear up for a $27 billion security token market
  • Binance launches Bitcoin mining cloud services
  • Celsius submits revised bankruptcy plan
  • AEVO Options Open Mainnet is now live.

Wrapping Up

Today's top stories revolve around Tether's potential liquidity crisis threatening to unsettle the crypto industry, while EigenLayer's Ethereum staking protocol takes a promising step forward with its successful mainnet launch. As the Federal Reserve maintains steady rates, traditional and crypto markets respond with volatility, and BlackRock edges closer to launching a Bitcoin ETF. Stay tuned to navigate these turbulent waters. See you tomorrow!