The collapse of the crypto Luna and its associated stablecoin terraUSD was truly unexpected. while many of us were unfamiliar with the UST before, and what the stablecoin actually stands for. This is a big deal, as billions of dollars in crypto wealth have been vaporized by their plunging shockwaves in the market.
Looking at the graph of the Cryptocurrency market nowadays, it looks unsafe in all possible directions. As Bitcoin and ether are at their lowest point since 2020, altcoins, dogecoin, and Cardano are falling even worse.
Virtual currency volatility and tumultuous economic conditions not only affect cryptocurrency, but the stock market as well. This unprecedented plunge is truly painful for crypto investors.
The founding partner of ANT Capital, Jun Yu, tweeted about the risk associated with USDT still and cannot redeem USDT 100%. The collapse of USDT due to a run is really small. According to a recent report Tether currently has more capital than debt, the value of reserves is greater than the market value of the issued stablecoin.
Tether currently has assets worth $82.4 billion and liabilities worth $82.2 billion. Even though Tether’s assets are greater than its liabilities on the books, it has not considered liquidity risk when valuing its assets and building up reserves for expected loss of confidence and dividing of its assets. And it is impossible to eliminate these risks even after training.
Further, A recent audit report states that 85.64% of Tether’s assets have relatively good quality liquidity. The proportion of cash still remains low, accounting for less than 5%, and more are US Treasury bills which is almost 47.56%, commercial papers, commercial paper certificates of deposit, currency funds,etc. And another 14.36% of assets are from other investments, corporate bonds, funds, precious metals, and secured loans.
considering the safety factor of these 85.64% assets is still doubtful. Cash, US treasury bills and money market funds are relatively safe, but commercial paper and certificates of deposit should be more concerned about security. They are still associated with liquidity risk and default risk, even though they have a maturity of 44 days with an average rating of A-1.
The remaining 14.36% of Tether assets fluctuate more, and more than 60% of Tether assets have good quality and are realized in a short time to meet the redemption demands.
But, many small currency holders do not even have US dollar accounts and Thether assets will not be able to fully redeem all stablecoins. Therefore, it is not possible to redeem 100% of USDT.
