Popular stablecoin project Tether (USDT) has partnered with Aave Protocol for the provision of new decentralized finance (DeFi) products, including flash loans.
If you haven’t heard of it, Aave is an Ethereum-based DeFi protocol aimed at providing new services to the finance world. It has chosen to partner with Tether because the stablecoin offers a wealth of liquidity within the DeFi space. CEO Stani Kulechov says the new project will help “bootstrap DeFi composability via flash loans, lending, and borrowing.”
The company also believes Tether provides the best ROI for lenders, at up to 12%. By comparison, fellow stablecoins like MarkerDAO and Circle’s USDC offer between 5 and 8%. It’s flash loan products will allow customers to borrow a basket of Ethereum-based ERC20 tokens, without the need for collateral – so long as the loan is returned in the same transaction.
The news follows reports last month that crypto exchange giant Binance was running out of Tether tokens, causing problems for users. Some traders found they were unable to open long positions on the Bitcoin/Tether (BTC/USDT) trading pair, with popular trader Jacob Canfield tweeting about the incident: “Bitcoin dominance is approaching key support and we are seeing USDT loans running out on Binance.”
The following day 5 million USDT was transferred to the exchange from the Tether Treasury. Not long after, on March 4th last week, Binance suffered an outage at the same time that Tether was planning an OMNI to ERC20 chain swap of 200 million USDT. The coincidence led many to surmise that the two incidents were related, although no official statement was made.
The fresh injection of Tether has not helped the market as many hoped. Over the past few weeks, the cryptocurrency market cap has dropped steadily with almost all coins losing value. Bitcoin (BTC) is down a huge 20% over the past 30 days, with Ethereum (ETH) down 10% and XRP down 24%. Chainlink (LINK) and Tezos (XTZ) remain two of the few coins in the green, with 23% and 10% gains respectively over the past 30 days.
However, stablecoins have been receiving an influx of investment lately in light of struggling fiat markets. It seems the market dip as a result of coronavirus panic may be driving capital into Tether and other stablecoins. The transaction volume for decentralized stablecoins MakerDAO (DAI) and USDC have also seen increases recently.