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Tether lost $7 billion

Tether lost $7 billion

Investors withdrew more than $7 billion from Tether's stablecoin following the brief loss of its dollar peg, which has raised new doubts about the reserves behind the world's largest stablecoin.

Investing.com data shows that Tether's working capital supply dropped from about $83 billion a week ago to less than $76 billion dollars. Since the stablecoin is pegged to the dollar, it should always be worth $1. But last week, its price dropped to 95 cents amid panic over the collapse of a competitive token called Terra USD.

Most stablecoins are backed by fiat reserves, which means they have enough collateral in case users decide to withdraw their funds. But a new generation of "algorithmic" stablecoins, such as Terra USD or UST, feature a dollar peg based on a mathematical code, which has been challenged recently as investors have become disappointed in cryptocurrencies.

All this highlighted the problem of the reserves backing Tether. Back when Tether's reserves data was last released, the cash accounted for $4.2 billion. The vast majority of the reserves ($34.5 billion) consisted of unidentified Treasury bills with a maturity of less than 2 months, and $24.2 billion of assets were in commercial paper.

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