Tether Co-Founder’s Stablecoin USST Depegs Hours After Launch

USST, a new stablecoin launched on Friday, Oct. 10 by stablecoin platform STBL, co-founded by one of Tether’s founders, slipped below its $1 peg to as low as $0.96 within hours of debuting on Curve, sparking concerns over confidence in the project.

At the time of writing, USST is trading at around $0.9776, down 1.5% in 24 hours with a market cap of roughly $967,000 and just 52 holders, according to data from GeckoTerminal.

The Curve pool showed around $965,000 in liquidity and 24-hour trading volume of $484,000, with net outflows of about $466,000. So far, 50 transactions have been recorded in the past 24 hours.

Earlier today, STBL announced a new USST-related partnership with Ondo Finance – which has a total value locked (TVL) of $1.76 billion — that makes Ondo’s USD-pegged, tokenized yield-bearing asset, USDY, the primary collateral for USST. Up to $50 million in USST stablecoin mints will be backed by USDY, according to a press release shared with The Defiant. For its part, USDY is collateralized by U.S. Treasuries and cash deposits.

STBL is a decentralized protocol that offers both a stablecoin, USST, as well as a separate yield-bearing NFT, YLD, that users receive when they mint USST. The project is co-founded by Reeve Collins, one of the co-founders of Tether, who was also the USDT issuer’s CEO from 2013-2015. Tether’s USDT dominates global stablecoin markets, with a current market capitalization of $177 billion, making up over 58% of the sector, per DefiLlama.

The early depeg event underscores how difficult it can be for new stablecoins to establish confidence, where liquidity depth, transparency, and credible collateral are important to maintaining a dollar peg.

What It Means

Catie Romero, CEO and co-founder of crypto growth and advisory firm BABs, told The Defiant that early peg wobbles are common among new stable launches. Romero said that the depeg “looks like a liquidity-calibration issue more than a structural failure,” adding:

“Shallow pool depth, incentives still spinning up, and uneven mint/redemption flows can exaggerate small sells.”

Kadan Stadelmann, CTO of Komodo Platform, echoed Romero’s stance, noting that while USST hasn’t structurally failed yet, there is some risk.

“Small deviations in the peg are common early on in the life of stablecoins, but if they’re not resolved they could undermine the entire STBL ecosystem, which could lead to outflows from STBL into other stablecoin ecosystems,” Stadelmann said. “In the past, stablecoin projects have managed such depegs through boosted yields, reserve injections, and buybacks.”

Romero added that once buying and selling routes work smoothly, market makers usually step in to stabilize the price once returns make it worthwhile.

STBL Token Drops

Meanwhile, STBL, the ecosystem’s governance token which just launched on the BNB Chain ecosystem last month, fell sharply over the past 24 hours, amid a broader selloff, likely reflecting a loss of confidence as USST made its shaky debut. STBL is currently trading around $0.17, down 18% on the day and over 36% on the week.

STBL 24-hour price chart. Source: CoinGecko

“It’s a credibility test here, not an autopsy. STBL is under significant pressure,” Romero told The Defiant. She added that the token’s drop today “suggests a reflexive loop between governance token confidence and the perceived resilience of the stablecoin (something we’ve seen in prior early-stage ecosystems like the UST pre-peg recovery),” referencing one of crypto’s largest collapses, involving Terra’s algorithmic stablecoin, UST.

She added that while today’s USST depeg isn’t substantial in crypto terms, it’s enough to shake investor confidence, at least temporarily.

“Social data shows that negative sentiment spiked 3.2x after the peg slipped, amplifying the narrative faster than liquidity could rebalance,” Romero continued. Meanwhile, Stadelmann echoed the sentiment, saying that STBL’s token has suffered due to USST’s depeg.

“There are now doubts about the project’s overall viability,” he said. “Users are watching to see how the project reacts and if it nips the issues in the bud and is able to restore confidence.”