How stable are stablecoins?

Tether, the fundamental liquidity mechanism worth $ 83 billion for the entire crypto industry, is falling against the dollar, regardless of their commitment.

Tether guarantees one-to-one redemption of $ 1 to customers, with the proviso that redemption may be delayed if such delay is necessary due to illiquidity or lack or loss of any reserves held by Tether to support Tether tokens .

Under normal circumstances, institutions that have access to Tether’s main exchange market buy discounted coins on the secondary market and then sell them directly on the primary market, thus reducing supply and arbitrage the price back to $ 1.
The fall of the Terra stablecoin on Monday caused panic in the crypto space. There are rumors of problems with the solvency of custodians of coins and funds, raising questions about the exact nature of Tether’s reserves and its real protections.

The Federal Reserve, the European Central Bank and the Bank of England recently sounded the alarm about stablecoins and their links to the traditional financial system. The latest Fed report on financial stability warns that coins may lose value or become illiquid during high volatility, and that vulnerabilities could be exacerbated by a lack of transparency about the risk and liquidity of stable coin assets.