Whale Manipulation of Tether (USDT) Causes Depegging on Curve, Offering Lucrative Arbitrage Opportunity for DeFi Traders

Whale Manipulation of Tether (USDT) Causes Depegging on Curve, Offering Lucrative Arbitrage Opportunity for DeFi Traders

The recent depegging of Tether’s USDT from its usual 1:1 ratio with the US dollar on the Curve platform has created a unique arbitrage opportunity for astute DeFi traders. Whales capitalized on this situation, reaping millions of dollars in profits. However, the substantial dumping of USDT by these large holders has raised concerns about the stability and reliability of the dominant stablecoin.

The Curve 3pool liquidity pool has been heavily impacted by the massive sell-off of Tether by whales. As a result, USDT now accounts for over 70% of the liquidity pool, while each other currency represents just over 13%. This dominance level is the highest observed since November 20, 2022.

One significant participant in the USDT depegging scenario is czsamsun.eth, who appears to have shorted USDT on Aave V2 after the depegging occurred. czsamsun.eth borrowed a substantial amount of USDT from Aave V2, specifically 31,544,278 USDT, and exchanged it for 31,475,408 USDC at a rate of $0.9978. Additionally, 10 million USDC was deposited back into Aave V2, signaling a determined effort to take advantage of the depegging situation.

The sudden depegging of USDT from the US dollar presented a once-in-a-lifetime opportunity for these traders to profit from arbitrage, leveraging price disparities across different marketplaces. This disparity existed between the lower trading price of USDT and its regular dollar parity.

Address 0xd2 is another notable beneficiary of the USDT depeg. Through Aave V2, this address deposited 52,200 stETH (equivalent to $85 million) and borrowed $50 million in USDC in multiple phases. By trading substantial volumes of USDT at a reduced rate, the trader capitalized on the lower USDT price using borrowed USDC, which maintained a 1:1 peg with the US dollar. If USDT returns to its 1:1 peg, these traders can sell their USDT profitably, repay their borrowed USDC, and keep the difference.

The recent dumping of USDT by whales and its consequential impact on the Curve 3pool have cast doubt on Tether’s stability and dependability. Tether is currently trading at $0.9968, experiencing a loss of 0.33% in value over the last 24 hours. Nonetheless, USDT remains one of the largest and most widely utilized stablecoins in the cryptocurrency industry.