The fears of a Tether collapse have been around since the early days of Tether.

Most people believe it could be the biggest black swan event, while some say it would be the end of crypto. They call it Tetherpocalypse.

But is it still gonna be as bad as the original theory portrayed it?

After all, the Tetherpocalypse theory came from a fear that too much of the trading volume was done in just Tether, at a time when Tether was the only relevant stablecoin, and had essentially all the trading volume. Which is no longer the case.

Tether still has a big share of the stablecoin volume at $3,000B of the trading volume.

But USDC and FDUSD are catching up every year, and now have $1,400B of the trading volume combined. Closing in on nearly half of Tether's volume.

Something we've never had in the early years of Tether.

https://preview.redd.it/n50wnvofnfzc1.jpg?1260&format=pjpg&auto=webp&s=922d5bc915cb3a366b7b544d3f957b5b1010f345

Tether's dominance of the stablecoin market went from over 90%, to now dropping to around 60-70%, and if the trend continues, will likely continue to drop.

What happens when a stablecoin collapses: the lessons from the TerraUSD UST collapse.

1- UST and the numbers.

Panic and depegging.

It wasn't just UST that was depegging, but other stablecoin initially started to depeg, and then managed to quickly re-peg.

Bitcoin dropped from $39K to $28K in the initial drop, and further dropped to $19K from this black swan event. However, the market was already in a bear market, and sentiments were already bearish.

It was a black swan event the likes of which we've seen during the Hash Wars in 2018.

But it wasn't a total apolypse of crypto.

A lot of the stablecoin volume simply transfered to USDT, USDC, DAI, etc... USDC saw a surge of more than 4x its volume at the time, while Tether doubled.

Now, UST was only $18B at the time. While USDT was at $80B

So Terra was more than 4 times smaller.

But an $18B market cap stablecoin is no small fry. That's the volume of Tether 2 years before in 2020.

2- The collapse of Tether.

If Tether collapsed completely the same way Terra did, it would be much larger, mainly because of its over 60% volume of all the trading.

It would be a black swan event out-doing the Hash Wars and Terra Luna, by quiet a margin.

Will it be a total Tetherpocalypse and end of crypto? Or something to a higher level than Mt Gox?

Probably not the end of crypto.

As we've seen in the Terra collapse, there's other stablecoins that volume can run to. Other stablecoins that have taken an increasingly larger slice of the market on exchanges over the years, and growing rapidly.

It will still be much worse than what we've seen with Terra UST, but the market has grown since. And we've also seen how quickly non-algo stablecoin can re-peg, compared to UST.

Also, keep in mind that the Terra Luna fiasco and collapse happened several months into a bear market, when fears were already high. Likely amplifying the fear and panic inherent at the time. If Tether would collapse during a bull market, at the height of blind bullishness, the story could be different than a collapse during a bear market.

But can Tether even collapse like TerraUSD UST?

Probably not, since Tether is not an algorithmic stablecoin.

The issue with Terra UST, is that it was an algorithmic stablecoin. That's why it wasn't able to repeg, and spiral led down and completely collapsed.

The system of UST had a flaw, where it could just continuously depeg.

On the other hand, Tether is more of a ....fixed stablecoin. Maybe even a fraudulent stablecoin. People always complain about how Tether is rigged, and they're right. But that very control they have and the way it's rigged, is also what's gonna make it harder for it to collapse, and why it has been so resilient. In a system run on bullshit, you only need to sprinkle more pixie dust to keep it going.

There is a control they have for supply and demand, where they can burn Tether or mint Tether to adjust to the market.

What would cause a Tether collapse? We only know what won't collapse it, from what we've seen so far: a bear market, a pandemic, a war, a major exchange collapse, a recession, a stock bear market, a major crypto collapse, regulation crackdown, crypto ban FUD, a stablecoin causing a depegging panic, etc....

So what's really left to cause a collapse?

That's not to say Tether won't collapse.

But it may not be in the glorious way Terra collapsed. If Tether collapses, it will more likely be a long slow collapse over the years, just losing dominance cycle over cycle.