Weakness in crypto markets, the failure of a dollar stablecoin and a reduction in leverage in decentralized finance (DeFi) are resulting in the “crypto equivalent of quantitative tightening,” Morgan Stanley (MS) said in a report Tuesday.
The recent collapse of stablecoin TerraUSD (UST) saw Tether (USDT) also lose its dollar peg intraday, and this caused crypto prices to drop further as some questioned the stability of the third-largest cryptocurrency, bank said.
USDT has a market cap of $73 billion and is the most heavily traded digital asset on a daily basis, the report said. More than half of all bitcoins (BTC) traded on exchanges are traded against USDT.
Investors are redeeming USDT at a record pace, the bank said. Some $10.6 billion of redemptions occurred in the last month alone, while other stablecoin issuance is not rising.
Morgan Stanley called this the “crypto equivalent of quantitative tightening, as total stablecoin market cap falls, and liquidity on decentralized...
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