Tether's Paolo Ardoino Raises Concern Over Rapidly Growing Competitor UST: 'It's Really Hard To Predict'

Paolo Ardoino — the chief technology officer at Tether USDT/USD, the firm behind the leading stablecoin — commented on the growth of TerraUSD UST/USD after the token became the third-largest stablecoin and overtook Binance USD BUSD/USD, the stablecoin of the world's top crypto exchange Binance.

What Happened: During an interview published on Tuesday, Ardoino dismissed TerraUSD and told crypto news outlet CoinDesk that "it's all fun and games if you’re a $5 [billion] or $10 billion market cap stablecoin."

He expressed concern over UST's algorithmic nature, which uses complex cryptoeconomic systems to keep the token's value close to $1 despite it being backed by volatile digital assets. His comments follow UST's market cap growing 138-fold in 2021.

Ardoino explained, "if you have a liquidation [with an algorithmic stablecoin of UST's size] with this market, you can still handle that." Still, he said "if you have an $80 [billion] or $100 billion market cap stablecoin like Tether that’s [primarily] backed by digital assets. It’s really hard to predict what will happen and [know] if there will be enough liquidity to backstop that immense cascade.”

As Benzinga reported on Monday, market data showed TerraUSD has overtaken Binance USD and became the third-largest stablecoin by market cap. USDT's market cap surged by 15% over the last 30 days and reached about $17.5 billion, with Binance's token following at about $17.46 billion. At the time, the stablecoin was outranked only by Tether's controversial USDT at $82.8 billion and Circle's USD Coin USDC/USD at $50 billion, a token adopted by Visa Inc. V.

As of press time, TerraUSD's market cap stands at $17.6 billion whereas Binance USD's supply is worth $17.37 billion, meaning that so far Terra's LUNA/USD algorithmic stablecoin is holding onto its newly acquired place on the podium. Still, volume data suggests that despite the higher market cap, UST may be seeing less use than BUSD, with its 24-hour trading volume currently standing at $521 million — a measly 11.7% of Binance USD's $4.46 billion.

Some raised concern that over 67% of the demand for TerraUSD comes from interest-yielding decentralized finance (DeFi) protocol Anchor Protocol ANC/USD. The platform offers a relatively high yield of 19.5% on UST deposits and some believe that if it were to fall, stablecoin holders could sell their tokens and a lack of liquidity could crash its value.

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