USDT is facing serious selling pressure. Are market makers exiting?

Original author: Jaleel, Leo

Editor: Jack, BlockBeats

According to the data, in the past 24 hours, a total of 99 million USDT has been sold in Curve's 3pool, with a net outflow reaching 64 million dollars. In the past 3 days, a total of 205 million USDT has been sold in the 3pool, with a net outflow amounting to 130 million dollars. Meanwhile, according to the latest data from Curve, as of the time of writing, the proportion of USDT in the 3pool has reached 74%, totaling 301,753,409 tokens. The proportions of DAI and USDC are 12.91% and 12.74%, respectively.

In the past 48 hours, the concentration of USDT in Curve's 3pool has risen to 50%, and within just one hour, it surged to 74%. This has raised concerns in the community, as many seem puzzled by the sudden selling pressure of USDT. Could it be that someone had prior knowledge of some key information? After all, the last time the concentration of USDT in Curve's 3pool exceeded 50% was during the FTX collapse in November 2022, and it has not reached such a high level since then.

Are Market Makers Exiting?

Today's selling pressure on USDT inevitably reminds us of the rapid depletion of market liquidity over the past month. Recently, the market has performed poorly, seemingly entering a state of liquidity scarcity. Especially notable was the "15-minute crash" event on June 10, where altcoins generally fell over 20%, and mainstream coins also experienced corresponding declines. It is worth noting that at that time, the market had not yet been affected by the SEC's regulatory actions. Speculations regarding the cause of the "15-minute crash" have emerged, including rumors that Jump Trading and DWF are withdrawing liquidity and exiting the market.

In fact, these speculations are not unfounded. Today, DWF Labs managing partner Andrei Grachev tweeted that the market's 24-hour spot trading volume has dropped to 23 billion dollars, the lowest since the winter of 2019. He revealed that trading platforms are starting to impose requirements on project trading volumes and liquidity, or they will delist them. Retail activity is also relatively low, but for those looking to speculate, make money, or lose money, they still need something to meet their demands. Even larger market cap coins can experience price fluctuations of 20-30% within 24 hours.

Additionally, Grachev explained that IDOs, IEOs, and direct listings are no longer popular, and many are waiting for new developments, including Binance Launchpad projects, as they consistently stimulate retail activity. If a project succeeds, many will try to emulate it. "Projects, trading platforms, market makers, and other market participants are working behind the scenes to fix the market. While there is no 100% solution, these efforts will certainly benefit the market. We are currently in a low point of market activity, but the future of prices remains uncertain. In a few months, we expect our market activity to increase and drive prices up, depending on our luck."

Andrei Grachev's statements are clearly reflected in the once-promising industry star Sui. Previously, Sui, which strongly launched on trading platforms like OKX and Kucoin, has seen its token price stagnate after a brief surge. Despite OKX's repeated support for new projects in the Sui ecosystem, the price performance of its token SUI has been very lackluster, continuously declining. According to insiders from institutions who spoke to BlockBeats, due to the depletion of liquidity and the significant selling pressure from the IEO, many institutions and market makers are unwilling to provide liquidity for SUI. A once-star public chain seems to be sliding towards the edge of "project demise."

As the most commonly used virtual asset by market makers, most institutions hold USDT. Given various hints of information, we can't help but wonder if today's severe tilt in the Curve 3Pool is also related to institutional exits.

Will USDT Decouple?

With the resurgence of FUD surrounding USDT, some in the market are eager to short USDT (BlockBeats Note: Refer to "Follow the Institutions: How to Hedge USDT Shorts on-chain?"). So, will USDT experience severe decoupling again?

Some voices from the community express skepticism about this. A Twitter user named Spreek (@spreekaway) stated that the liquidity in Curve's liquidity pool is now very low and is no longer an important source of liquidity; overall market liquidity has declined, and Curve seems to have lost its pricing power.

Spreek pointed out that it is worth noting that during the last Tether decoupling event, the size of Curve's liquidity pool was about 6 times larger than it is now. Others believe that before a redemption occurs, secondary liquidity is usually consumed first, as the redemption fee is 10 basis points. This time, the outflow of funds required to exhaust secondary liquidity is less than last time. By observing the trading volume when the price reaches the redemption price, one can gauge people's attention to this issue. If there is a lot of trading volume below the redemption price, it indicates that people are paying more attention.

When the liquidity of a stablecoin is overly concentrated, any threat or fluctuation to the supply or liquidity of that stablecoin can have a significant impact on the entire Curve platform and its users. This could lead to market instability and uncertainty. Excessive concentration may result in imbalanced liquidity, where some stablecoins have excess liquidity while others are insufficient, potentially affecting trading efficiency and costs, and having a certain impact on price formation.

"Will USDT experience severe decoupling again?" In response to this question, Tether CTO Paolo Ardoino stated on Twitter that the market is currently turbulent, making it easy for attackers to exploit this widespread sentiment, "but Tether is as always prepared; let them come, we are ready to redeem any amount of funds."