The cryptocurrency markets endured a loss of as much as $10 billion around 21:00 UTC on Thursday, following allegations that the Bitfinex exchange covered up an $850 million shortfall using the U.S. dollar-pegged Tether (USDT) stablecoin.

The New York Attorney General’s office alleged in a statement on Thursday that Bitfinex lost $850 million and used customer and corporate funds from the affiliated stablecoin operator Tether in a coverup.

The allegations appear to have affected USDT’s peg to the U.S. dollars, and have shaken market confidence that triggered an overall sell-off with larger cryptos by market cap such as ether and XRP down 6.99 and 4.8 percent, respectively.

Based on data from CoinMarketCap, the overall crypto market’s capitalization dropped by $10 billion to as low as $167 billion around early Friday morning UTC time, and has since then climbed back above $172 billion as of press time.

Daily chart – Tether

At 21:00 UTC on Thursday, the price of USDT began to fall from the desired set price of $1.00 to as low as around $0.955, according to data from the Kraken and OKCoin U.S exchanges – the two that provide trading pair for USDT against the U.S. dollars.

The USDT price has since then climbed back and is currently changing hands around $0.97 on both Kraken and OKCoin, and may see further price uncertainty as the day continues to develop.

Other stablecoin assets such as USDC, TrueUSD and GUSD are all in the green up between 0.25 and 3 percent as a result of shifting investor funds toward some of the other more regulated alternatives.

Interestingly, Maker (MKR), the crypto asset behind the MakerDAO stablecoin project is down 14.65 percent over a 24-hour period, having dropped $73 in value and is currently the worst performer among the top 25 crypto. All despite recent upgrades to stabilize its value through a fee increase.

Daily chart – Other markets

Meanwhile, as seen above, the reaction to the Bitfinex and tether allegations has been negative with the majority of cryptocurrencies flashing red today.

Bitcoin has since recovered slightly and is changing hands at $5,138 after dropping to a low of $4,953 on the Coinbase exchange late Thursday.

And Whale Alert, a Twitter service that monitors blockchain transactions, notified that hours after the news, 3,999 bitcoin, which was worth $20 million, got moved out from Bitfinex’s exchange wallets to unknown addresses.

Such recent moves are indicative of trader’s sentiment who are currently seeking to reduce their risk by transferring funds away from the allegedly troubled exchange.

However, others have fared better than some with the majority of stablecoins seeing upside action as investors shift their preference away from Tether to other viable options such as Circle’s USDC or Gemini’s GUSD.

Ether is today’s worst performing asset amongst the top 3 major networks, down 6.91 percent and is struggling to find a strong bid beyond $152 after falling from $165 at 21:00 UTC yesterday.

Disclosure: The author holds no cryptocurrency at the time of writing.

Untethered image via Shutterstock; charts via TradingView