Recent data indicates significant selling activity for Tether (USDT) within Curve's 3pool liquidity pool. Over the past 24 hours, 99 million USDT were sold, resulting in a net outflow of $64.4 million. The past three days saw 205 million USDT sold, with net outflows reaching $130 million. At the time of writing, USDT's share in the 3pool has surged to 74%, totaling 301,753,409 tokens, while DAI and USDC account for 12.91% and 12.74%, respectively.
This concentration level is unusual. Within a recent 48-hour window, USDT's share rose to 50% and then spiked to 74% in just one hour. This rapid shift has sparked community concern, with many puzzled by the sudden selling pressure. The last time USDT concentration exceeded 50% was during the November 2022 FTX collapse, and it hasn't reached such levels since.
Are Market Makers Exiting?
The current selling pressure echoes broader market trends of rapidly diminishing liquidity. Market performance has been poor, with signs of liquidity drying up. A notable event was the "15-minute flash crash" on June 10, where altcoins dropped over 20% and major cryptocurrencies followed suit. Interestingly, this occurred before the recent SEC regulatory actions.
Speculation about the crash's causes includes rumors of Jump Trading and DWF withdrawing liquidity and delisting tokens. These theories aren't entirely baseless. Andrei Grachev, Managing Partner at DWF Labs, recently tweeted that 24-hour spot trading volume has fallen to $23 billion, the lowest since winter 2019. He revealed that exchanges are imposing stricter requirements on projects regarding trading volume and liquidity, with non-compliance leading to delisting.
Retail activity remains low, but those seeking speculation opportunities still need vehicles for action. Even large-cap tokens can experience 20-30% price swings within 24 hours. Grachev noted that IDO, IEO, and direct listings have lost popularity, with many awaiting new models like Binance Launchpad projects, which tend to boost retail activity. Successful projects could inspire imitators.
Projects, exchanges, market makers, and other participants are working behind the scenes to repair the market. While no perfect solution exists, these efforts should bring some benefits. We are in a trough of market activity, but future price direction remains uncertain. Activity could increase in the coming months, potentially driving prices up, depending on broader factors.
This dynamic is evident in the case of Sui, a once-promising Move-based blockchain. After a strong IEO on exchanges like OKX and KuCoin, SUI's price peaked briefly and then declined steadily. Despite OKX's support for Sui ecosystem projects, SUI's performance has been weak, with persistent downward pressure. According to sources, many institutions and market makers are reluctant to provide liquidity for SUI due to the poor IEO performance and overall liquidity crunch. A former star project appears to be struggling.
Given that USDT is a primary asset for many market makers, the current Curve 3pool imbalance raises questions: Is this selling pressure linked to institutional exits?
Could USDT Depeg Again?
With renewed fear, uncertainty, and doubt (FUD) around USDT, some traders are considering shorting the stablecoin. But will USDT experience another severe depegging event?
Community voices express skepticism. Twitter user Spreek (@spreekaway) argues that Curve's pools now have relatively low liquidity and are no longer a primary liquidity source. With overall market liquidity down, Curve may have lost its pricing power.
Spreek points out that during Tether's previous depegging event, Curve's pool was about six times larger. Others note that before redemptions occur, secondary liquidity is typically depleted first due to a 0.1% redemption fee. This time, less capital outflow is needed to exhaust secondary liquidity. Monitoring trading volume when prices near redemption levels can indicate market concern. Significant trading below redemption prices suggests heightened anxiety.
High concentration of one stablecoin in a pool poses risks. If that stablecoin's supply or liquidity is threatened, it could impact the entire Curve platform and its users, leading to market instability and uncertainty. Imbalanced liquidity can make some stablecoins overly abundant while others are scarce, affecting trading efficiency, costs, and price discovery.
When asked about another potential depeg, Tether CTO Paolo Ardoino tweeted that in turbulent times, attackers easily exploit general sentiment. "But Tether is ready as always. Let them come. We are ready to redeem any amount," he stated.
As the situation evolves, USDT's concentration in the Curve 3pool continues to increase. Users should be aware of associated risks. The market will closely monitor developments within the Curve ecosystem and their broader implications.
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Frequently Asked Questions
What is the Curve 3pool?
The Curve 3pool is a liquidity pool on the Curve Finance decentralized exchange that holds three major stablecoins: USDT, USDC, and DAI. It allows users to swap between these assets with low slippage.
Why does high USDT concentration matter?
High concentration of one stablecoin, like USDT, indicates selling pressure or reduced demand for that asset. It can lead to liquidity imbalance, increasing the risk of price depegging or higher transaction costs.
How can traders monitor USDT stability?
Traders can track metrics like pool composition on Curve, redemption rates, and trading volumes on major exchanges. Tools for on-chain analytics provide real-time insights into stablecoin health.
What causes a stablecoin to depeg?
Depegging can occur due to loss of confidence, regulatory news, liquidity crises, or market manipulation. It means the stablecoin's market price deviates significantly from its intended peg, usually $1.
Are market makers really exiting cryptocurrencies?
Some evidence suggests reduced activity by market makers due to lower volumes and regulatory pressures. However, this varies by firm and region, with many still active but more selective.
What should investors do during high volatility?
Investors should assess their risk tolerance, avoid overexposure to single assets, and use reliable platforms for trading and information. Diversification and staying informed are key strategies.