You speak very eloquently, but there is one area I don’t feel comfortable with.
You say : "Tether is at least partially backed and has functioning wires in and out of the bank they use.”
Is it enough to assert that USDT is not a huge threat to the whole crypto space ?
Tether Inc. eventually disclosed its balance sheet in May 2021. Almost all of their “reserves” are in some form of loan to a commercial company (corporate bonds, commercial paper, secured loans, repo market (!!!)) and only around 5% are in assets whose value we know (cash, T-Bills).
Additionally, non-USD reserves for a stablecoin are a problem. As noted by Frances Coppola, “it’s dangerous to guarantee to clients that something is worth $1 when your assets backing it are not dollars. The value of the USD changes very little. The value of crypto changes a lot”.
To quote Bloomberg “a sudden loss in confidence in Tether would likely generate a liquidity shock to BTC markets”.
So my question is : what would happen if a sudden loss of confidence led to a “Tether run” to redeem those dollars ? will the exchanges let “Tether holders convert $24B of Tether into Bitcoin” as you said ? Wouldn’t that be another Lehman Brothers ?
You speak very eloquently, but there is one area I don’t feel comfortable with.
You say : "Tether is at least partially backed and has functioning wires in and out of the bank they use.”
Is it enough to assert that USDT is not a huge threat to the whole crypto space ?
Tether Inc. eventually disclosed its balance sheet in May 2021. Almost all of their “reserves” are in some form of loan to a commercial company (corporate bonds, commercial paper, secured loans, repo market (!!!)) and only around 5% are in assets whose value we know (cash, T-Bills).
Additionally, non-USD reserves for a stablecoin are a problem. As noted by Frances Coppola, “it’s dangerous to guarantee to clients that something is worth $1 when your assets backing it are not dollars. The value of the USD changes very little. The value of crypto changes a lot”.
To quote Bloomberg “a sudden loss in confidence in Tether would likely generate a liquidity shock to BTC markets”.
So my question is : what would happen if a sudden loss of confidence led to a “Tether run” to redeem those dollars ? will the exchanges let “Tether holders convert $24B of Tether into Bitcoin” as you said ? Wouldn’t that be another Lehman Brothers ?
Thanks a lot