Popular stablecoin moves reserves from Tron to Ethereum.

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After what happened to the Terra ecosystem some weeks ago, Tether is reacting by moving some of its stablecoins to Ethereum. Avalanche will also be a beneficiary of the $1 billion money shift after it was announced to be a precautionary move, and not an attempt to buy into the currency market panic. 

Under the tag “business as usual, the Tether Foundation has chosen to effect a swap from USDT on Tron to Ethereum stablecoins and Avalanche USDT. This is in effect a move from TRC-20 to ERC-20. 

According to the Twitter handle of Tether, announced on May 12, it is just a reshuffling of the supply of USDT, and not an attempt to reduce the total supply. There will be a shift of $20 million stablecoin to Avalanche and 50 times that amount will be moved from Tron to Ethereum. A third party will affect the swap 

 

It is no news what happened to the Terra ecosystem and its algorithm-backed stablecoin. In the midst of the chaos that saw the stablecoin go several decimal places sub-zero, Tether snapped out of its peg too and traded around the $0.98 mark for several days. This caused some extra fear to the already-existing debacle and many investors withdrew liquidity on fears that the stablecoin is finding it hard to return to its egged price. The US government was not left out, seeing this as a perfect follow-up to their investigation on Tether some months ago, there were several calls to regulate the activities of stablecoins in the country, and to puh Central Bank digital currencies as a more viable alternative to stablecoins. 

In an exclusive interview with the Chief Technology officer for Tether, he announced that there is nothing to fear. Tether uses a different model to the UST stablecoin. Instead of using an algorithm to balance the price of the stablecoin, tether uses a portfolio that combines cash equivalent for every tether owned. There could also be some alternatives like treasury bills and commercial papers to offer a subtle form of diversification. 

 

The CTO also announced that despite the fear in the market during these uncertain periods, there was also an arbitrage opportunity for experienced traders with the opportunity. Some institutional buyers are getting tether at the ‘below the peg’ price and selling them for $1 on the Tether website. 

 

According to a statement given by the Tether website, there was over $300 million worth of withdrawals from the website and there is no outage of any sort. So far a customer is verified, there is no limit to how much he can withdraw from his account.

In a bit of thanksgiving, he announced that he is surprised at the market’s continued reliance on stablecoins even in the midst of the black swan event in the crypto market. The market is still rapidly evolving and will take these lessons to heart to avoid a repeat in the future. 

It is worth noting that just a year ago, stablecoins saw a bump in interest, but tether didnt get as much interest in Ethereum in Ethereum as many had predicted. Tron saw the most interest in tether stablecoin as it showed that people didnt want to pay so much on transaction fees to buy or sell. Even at this time, CoinMetrics, a notable crypto data provider, announced that although ethereum had more than half the total amount of tether tokens, the daily tether transactions have skewed towards Tron. 

The reason is not far-fetched. Ethereum, as seen on its eth block explorer, has been plagued with huge transaction fees, and it forms the basis for its transitioning to the proof-of-stake consensus. Being at the center of most blockchain activities meant the tether team could rely on its stability when tether launched in 2014. The main reason stablecoins were an instant hit was because of how easy it was to be holding assets when the market is experiencing increased volatility. They can also form the stability arm of many defi features like lending and staking.

Despite Tron’s fees being a fraction of Ethereum’s, the founder of Tron has previously explained that the blockchain is looking to borrow a leaf from Ethereum. Looking further, we see that tether transactions on Tron are carried out by retail investors with not much capital. Most institutional buyers do not use Tron for their tether purchases due to the track record of ethereum, and interoperability issues. 

 

In other news, the air has not cleared on Do Kwon, founder of the Terra ecosystem. There are plans to return the UST peg, and a hard fork has even been launched, but apart from the fact that it totally overlooks the displeasure of disgruntled investors, the airdrop released did not see much success. Do Kwon also explain that the base pool would need to be doubled from its $5 million base and the recovery block will need to be reduced by half to reduce the supply of UST in circulation.