Dow, S&P 500 Rise After Volatile Week

With the crypto markets remaining under pressure, and overleveraged investors continuing to be forced into liquidations, the market value of the largest stablecoin, tether, continues to decline.

Tether’s market cap slid to $69.1 billion on Friday. That is down from a peak of $83.22 billion 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 a steady value to national currencies and operate as dollar substitutes in the crypto markets.

There have been a wave of margin calls across the crypto-trading world recently, according to people in the market. 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 demand from a lender for more collateral from a borrower to back a loan. They usually occur after the value of the original collateral falls below a certain threshold. In that instance, the borrower often has to sell some other asset to meet the new collateral requirement, or the loan gets liquidated.

That is one reason why the largest cryptocurrencies, like bitcoin and ether, have been under so much pressure lately: They are the most liquid and easiest to sell quickly. Bitcoin has fallen 34% over the past ten days, according to Dow Jones Market Data. Ether is down 41% in that span.

“Across the board, every lender in the crypto space is making those calls, improving their own liquidity,” said Michael Safai, a founding partner at crypto high-frequency trading firm Dexterity Capital. “I don’t know anyone who’s not doing that.”

Tether Holdings Ltd., the company that issues and maintains the tether stablecoin, did not immediately reply to a request for comment.