Unforeseen Weightage Shift in Stablecoin Pool

Curve’s stablecoin pool typically maintains an even balance among USDT, USDC, and DAI, with each representing approximately 33.3%. However, on June 15, an unexpected surge saw USDT’s portion in the pool rise beyond 70%.

This led to a slight fluctuation in Tether’s USDT stablecoin value compared to its US dollar peg due to an unequal distribution in Curve’s 3pool. The price of USDT experienced a marginal decline of 0.3% to roughly 0.997 when its weightage in the Curve 3pool ascended from its customary 33.1% to over 70%.

Trading Dynamics in the Curve 3pool

Curve’s 3pool is a pivotal stablecoin pool within decentralized finance, boasting substantial liquidity across the top three stablecoins: USDT, USD Coin (USDC), and Dai (DAI). When a particular stablecoin’s share in the pool spikes, it’s a signal of a high selling volume of that asset.

With USDT’s weightage hovering at around 73.8%, traders appear to be shifting USDT for DAI or USDC at an increased rate. A similar scenario was observed in November 2022 during the FTX collapse when USDT’s portion in Curve’s 3pool surpassed 50%.

Behind the Imbalance: Whale Movements and Trading Activity

The imbalance’s primary driver seems to stem from a high-volume transaction linked to an address, referred to as CZSamSun. This entity borrowed 31.5 million USDT, which was then swapped for USDC, causing a minor dip in USDT’s peg value. The address leveraged 17,000 Ether (ETH) and 14,000 staked Ether (stETH) as collateral to transform the borrowed amount into USDC via the 1inch Network.

Following this, the borrower deposited significant amounts to Aave v2 and v3, which totaled $10 million and $21 million, respectively. The borrower then drew a USDT loan of 12 million from v3 and transferred it to v2.

Around 20 minutes post CZSamSun’s USDT loan, another address (0xd2…0701) pledged 52,200 staked Ether (stETH) via Aave v2 and borrowed 50 million USDC exploiting the USDT/USDC price gap.

Market Reactions and Tether’s CTO Remarks

The minor discrepancy in USDT price led to a new annual high of $1.0034 for the USDC/USDT trading pair on Binance. USDT represented 73.79% of Curve’s 3pool, while DAI and USDC held 13.05% and 13.16%, respectively.

Paolo Ardoino, Tether’s chief technology officer, took to social media to reassure the crypto sphere, dismissing the depeg fears as baseless. He stated that Tether is primed to redeem any quantity, dismissing market rumors concerning Tether’s depeg.

This stablecoin scare follows closely on the heels of a USDC depeg incident two months ago, which caused turmoil for numerous investors. USDC value dipped below $0.90 in March after Circle revealed it had over $3 billion frozen with Silicon Valley Bank. Although Circle managed to marshal enough capital to repeg USDC to the dollar within two days, the panic caused by the depegging incident led many traders to exit USDC at a loss.