As crypto markets remain under pressure and overleveraged investors continue to be forced into liquidations, the market value of the largest stablecoin, tether, continues to decline.
Tether’s market cap slipped to $69.1 billion on Friday. That’s down from the $83.22 billion peak on May 5, according to CoinMarketCap, and the lowest level since October 2021.
Stablecoins like tether and Circle’s USD Coin are designed to maintain stable value against national currencies and function as dollar substitutes in crypto markets.
According to people in the market, there has been a flurry of margin calls in the crypto trading world recently. In such situations, investors are often forced to sell liquid assets in order to meet their collateral requirements on their loans.
A margin call is a request from a lender for more collateral from a borrower to secure a loan. They usually occur after the value of the original collateral has fallen below a certain threshold. In this case, the borrower often has to sell another asset to meet the new collateral requirement, otherwise the loan is liquidated.
This is one of the reasons why the biggest cryptocurrencies, like bitcoin and ether, have been under so much pressure lately: they are the most liquid and the easiest to sell quickly. Bitcoin has fallen 34% in the past ten days, according to Dow Jones Market Data. Ether is down 41% during this time.
“Overall, every lender in the crypto space is making these calls, improving their own liquidity,” said Michael Safai, founding partner at high-frequency crypto trading firm Dexterity Capital. “I don’t know anyone who doesn’t do that.”
Tether Holdings Ltd., the company that issues and maintains the tether stablecoin, did not immediately respond to a request for comment.