Lots of big players slowly moving away from tether and that’s putting sell pressure. Unlike USDC or DAI, there’s no 1:1 redeemability to dollars for your average joe, so it requires a few key market makers who have access to tether redemptions to keep the peg, that’s why it’s not a super efficient market.
usdt has always felt like a house of cards. aside from any specific insider knowledge, presumably people got less comfortable holding it after watching ust collapse.
i certainly don't plan to touch it, and won't unless there's some incredible opportunity.
A bunch has been written on this in the last month; check Patrick McKenzie (patio11), JP Koning, David Gerard, etc.
If they have to redeem to cover market cap loses, won’t they have to redeem the high quality backing first, meaning over time the percentage of tether that is sketchily back will increase?
This may be true; I certainly wouldn't want to be the last one still holding USDT when the music stops. OTOH, it is rumored that Tether creates USDT and loans them out, treating the loan itself as the "backing". What if they recalled and canceled these loans first?
Overall I think a smaller market cap of a sketchy asset is better and a gradual wind down is better than a crash but ultimately if the assets don't exist then someone will be taking a haircut.