Early on Thursday morning, traders looked to be selling off millions of dollars-worth of USDT on Curve’s 3pool and Uniswap’s v3 USDC/USDT pool.   

The composition of 3pool, which facilitates stablecoin swaps, was made up of $297 million USDT representing 73% of the of the pool’s liquidity. For context, USDT on 3pool only exceeded 80% on two occasions in the last two years – the first time when TerraUSD (UST) collapsed in May 2022 and the second time during FTX’s implosion in November.

Curve has deep liquidity and is one of the go-to places for traders to swap stablecoins. An imbalance like this one on the Curve 3pool makes it more difficult to swap without large slippage.

Some large traders have also been heavily borrowing USDT on Aave and exchanging it for USDC on Curve. The rate for supplying USDT on Aave surged to 20% APY at the time of writing. 

Meanwhile, the liquidity profile on Uniswap’s v3 pool also did not appear particularly strong. With most of the liquidity concentrated around the $1 mark, a potential USDT depeg would have significant repercussions.

Blockworks research analyst Dan Smith noted that Tether, the company behind USDT, would be forced to redeem the stablecoin. 

“If they can do so without issue, then it’s a total non-event. Given the time of the market cycle, Binance/Coinbase suits, and US regulatory climate pushing MMs/funds out, crypto is fragile rn. Bad time to be testing tether,” he wrote on Twitter.

Paolo Ardoino, CTO of Tether, suggested that the activity was driven by traders making the most of the current market sentiment.

“Markets are edgy in these days, so it’s easy for attackers to capitalize on this general sentiment,” tweeted Ardoino. 

“But at Tether we’re ready as always. Let them come. We’re ready to redeem any amount.”