The biggest stablecoin in the cryptocurrency world is USDT and its fate will affect the future of crypto. Remember how FUD about USDT had a negative impact on the markets. Today, it’s a different Tether, and their recent decisions could have a positive impact on the markets. It may even change the stablecoin narrative.
USDT Breaking News
According to a recent breaking announcement from Tether, the company is taking important steps for USDT. Tether reduced its bank deposits from $5.3 billion to $481 million in the first quarter to reduce the risk of bank failures. Tether also added gold and Bitcoin to its asset reserves for the first time, accounting for 4% and 1.8% of its total reserves (approximately $3.2 billion and $1.45 billion).
Tether recently released its first quarter 2023 confirmation report. This report release, just days after the former SEC official’s accusations, was significant.
Today’s announcement said the following about company profits;
“Tether posted a record net profit of $1.48 billion in Q1. This brought the reserve surplus to another record high of $2.44 billion. This buffer, which is likely to continue to grow each quarter as Tether is profitable, gives users more confidence as it allows Tether to absorb any volatility with ease.”
Tether (USDT) Future
Tether continues to liquidate its collateralized loans in line with its previous commitments. These loans have fallen from 8.7% to 6.5%, both on a net basis and as a percentage of Tether’s reserves. The company’s ongoing commitment is to reduce collateralized loans to zero. However, it claims that Tether continues to remain strong even during periods of industry crisis and high volatility, thanks to its efficiency in over-collateralization and margin calls.
Tether reduced its commercial paper holdings to zero through 2022 and began buying US Treasury bonds for Tether’s reserves. As of Q1, Tether’s direct treasury holdings reached an all-time high of over $53 billion, representing more than 64% of total reserves. In fact, if you were to rank all the countries in the world according to their holdings of US Treasuries, Tether would rank just below Mexico. These Treasuries, along with other reserves in the Cash and Cash Equivalent category (e.g. overnight Repo, Term Repo, Money market funds, Cash and Bank deposits) have reached an all-time high of almost 85%.
This was not an extremely important development in terms of USDT’s stability to $ 1. Their statement on Gold and BTC was also extremely important.
“Tether added categories for Gold and Bitcoin assets for the first time with the Q1 statement. These assets represent 4% of total reserves for Gold and 1.8% for Bitcoin. This is part of Tether’s commitment to continue to be the industry leader in stablecoin transparency. Tether’s recently announced profits and full allocation to increase its reserves demonstrate Tether’s commitment to token stability and position it very favorably among financial institutions.”
Still, a group of experts argue that these attestation reports are not the same as actual audit reports. According to them, investors have to trust Tether, and they don’t have instant comprehensive audit reports to back up their trust. This is an important question for other crypto companies as well. The lack of frequent audits of financial statements makes it necessary for investors to rely on attestation reports and on-chain confirmations.
