What If USDT Loses Its Peg?
Tether (USDT) is a popular stablecoin, but with $110B+ in circulation, its opaque reserves and regulatory risks make it a potential systemic risk. If USDT crashes, it will cause a huge disaster.
Exchanges lose their primary trading pair in an instant liquidity crunch.
Big traders panic and dump bitcoin for fiat currency.
A bank run has happened for a stablecoin already, and prices for a different stablecoin are also tanking.
How the Crisis Would Unfold (Step by Step)
Phase 1: The Initial Indicators of Trouble
USDT trades at $0.98, whispers of depeg.
Binance and OKX see spikes in USDT sell orders.
Tether claims “business as usual” but delays audit updates.
Phase 2: The Panic Accelerates
Major exchanges halt USDT withdrawals.
Arbitrage bots fail to restore the peg.
Crypto Twitter erupts with #TetherBlackSwan.
Phase 3: Full-Blown Contagion
BTC & ETH crash 30%+ as traders flee to fiat.
USDC and DAI surge—but face redemption bottlenecks.
DeFi protocols freeze as stablecoin liquidity vanishes.
Phase 4: The Aftermath
CEXs delist USDT—forced conversion to USDC.
Stablecoin regulations accelerate—KYC becomes mandatory.
Crypto recovers… But trust is shattered.
Who Would Be Hit Hardest?
“USDT pairs form 70% of all cryptocurrency volumes across exchanges.”
Billions in USDT liquidity will disappear from DeFi protocols.
Many emerging markets depend on USDT to access the dollar.
How to Prepare (Before It’s Too Late)
Try holding a combination of USDC, DAI or FDUSD stablecoins.
Please remember to explore exit routes and familiarize yourself with how to quickly cash out to fiat.
Keep an eye out for USDT premiums on Kraken and redemption delays.
Conclusion
A USDT collapse isn’t guaranteed, but it’s possible. If it comes to fruition, damages will equal FTX plus Luna combined. Smart investors prepare while markets are calm.
