Tether has shed another $1bn (£805.8m) from its market cap, falling from $75.6bn to $74.1bn in the last 24 hours.
Markets analyst Crypto Whale Wednesday tweeted: "The implosion of tether is closer than ever. The eventual collapse of tether will eclipse the UST crisis by a thousand times."
In the week following the spectacular collapse of the terra algorithmic stablecoin, tether (USDT-USD) dropped from about $83bn on 11 May to around $76bn on Tuesday.
Investors have now redeemed over $7bn since the beginning of the recent crypto crash.
However, Tether Operations Limited, the company behind the world's biggest stablecoin, maintains that the withdrawals did not signal a "run on the bank".
In a statement, Tether said it “has never failed to process a redemption request for USDT at a value of $1” for every tether stablecoin.
As more USDT is cashed out by the day, the market capitalisation of tether's rival stablecoin, USDC, (USDC-USD) has gained approximately one billion in the past 24 hours.
Read more: Crypto live prices
This has been interpreted as a signal that investor stablecoin sentiment is starting to change, with a preference for USDC over USDT.
It has also led to speculation that USDC might soon flip USDT in market capitalisation rankings.
So far tether is maintaining its peg to the dollar and the company said that, "since May 11, Tether successfully processed $7 billion of USDT redemptions for verified individuals.
“Every redemption request which was submitted was redeemed in full.”
It added that it has sought to ensure that “it always has at hand a liquid portfolio of assets to manage redemptions, even in a bank-run scenario.”
— CryptoWhale (@CryptoWhale) May 18, 2022
Tether argues that it will be able to maintain its peg with the dollar, "when other stablecoins fall".
Tether USDT released a statement on its website saying that any time there has been a slight deviation from its peg to the dollar is because "selling pressure on exchanges has exceeded the limited liquidity on that exchange".
"Any given exchange will not have enough liquidity on its books to process the exchange of every USD₮ token for dollars.
"In instances where exchange liquidity is too low, investors come to Tether to request a redemption which is exactly what happened in May."
The situation is not healthy for the whole crypto-ecosystem as the total cryptocurrency market cap is now reaching the lows of July 2021, when it fell to $1.2tn.
The market capitalisation for the whole cryptocurrency market is now $1.3tn, falling from its all-time high of $2.9tn in November 2022.
Watch: What are the risks of investing in cryptocurrency