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Tether CTO says that a Majority of Tether’s Reserves in Treasuries

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Tether, USDT, Crypto, VOC

Key Insights:

  • Tether continues to honor redemption, Honors more than 300 million redemptions.
  • Tether’s CTO says a large chunk of its reserves is in the U.S treasuries.
  • Tether Stablecoin prices plummet below $1 peg.

Tether is the world’s third-largest cryptocurrency when it comes to market capitalization. On Thursday, via a Twitter space chat, Tether’s Chief Technology Officer, Paolo Ardoino, said after reducing Stablecoins exposure to commercial paper six months ago that, most of its reserves are in the United States Treasuries. 

Tether has continued to honor more than 300 million redemptions. On this note, Tether, Via the Twitter space chat, mentioned its desire to continue to honor redemptions. As of Thursday, it experienced no issues as it was processing over $2 billion. 

Earlier in the global session, Tether, a Stablecoin backed by reserve, plummeted to 95 cents according to CoinMarketCap’s  price data. Tether is supposed to have the same value as the United States dollar (1:1 peg). 

Typically, a Stablecoin is a Cryptocurrency that has its value pegged to fiat currency or gold. Stablecoins are designed this way to be less affected by volatility, making using digital assets for transactions difficult. The world’s largest Stablecoin, Tether, used to have a market cap of about $80 billion, rising from barely $4.1 billion at the beginning of 2020.

Although Arduino didn’t specify the proportion of Tether’s reserves stored in commercial paper, he stated that it’s “going down.” Also, he informed the public that updates on the Stablecoins reserve would be made available later this month.

However, according to the managing director of fixed income research at Barclays, Joseph Abate, investors are concerned that in a financial run, for Tether to honor redemptions, it may have no choice but to put its holdings up for sale. 

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In a research note on Thursday, Abate wrote, “Money market investors are nervous that if Tether is pushed to sell its CP (commercial paper) and CD (certificate of deposit) holdings, these normally illiquid markets could lock up, as they did in March 2020,”

He also pointed out that 44% of Tether’s holdings, which is the most significant, are liquid Treasury bills. Owing to this reason, the fear of liquidity may be early. He added that Tether equally owns some short-term assets that it can sell quickly.

However, according to the managing director of fixed income research at Barclays, Joseph Abate, investors are concerned that in a financial run, for Tether to honor redemptions, it may have no choice but to put its holdings up for sale. 

In a research note on Thursday, Abate wrote, “Money market investors are nervous that if Tether is pushed to sell its CP (commercial paper) and CD (certificate of deposit) holdings, these normally illiquid markets could lock up, as they did in March 2020,”

He also pointed out that 44% of Tether’s holdings, which happens to be its largest, are liquid Treasury bills. Owing to this reason, the fear of liquidity may be early. He added that Tether equally owns some short-term assets that it can sell easily.

 

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