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Why Cryptocurrency Veterans Are Highly Praising USDT During Recent Market Events?
Tether (USDT), the largest stablecoin by market capitalization, is a “safe haven” for many cryptocurrency holders. Users started actively buying USDT on centralized and decentralized exchanges. Ethereum (ETH) co-founder Vitalik Buterin appreciates the way Tether (USDT) has weathered the recent market disaster.
He acknowledged that USDT’s transparency leaves some to be desired, but the token and its issuer “exceeded” the expectations of advocates of deep decentralization. What needs to be added is that on November 10, 2022, in the bloodbath of the market, Tether (USDT) representatives released their proof of reserves.
As highlighted by Tether and Bitfinex CTO Paolo Ardoino, Tether Limited has increased its share of cash and its equivalents to an all-time high of 82%.
Mikko Ohtamaa, another Ethereum (ETH) veteran, CEO and co-founder of Trading Strategy, and former LocalBitcoins CTO, admitted that Tether (USDT) needs to be exposed to a liquidity crunch similar to FTX's if it needs to be exposed. A lot of money.
He emphasized that in 2022, there is no market for whales to short USDT to crash their issuer. A balanced reserve mix makes the entire system sustainable. On the nasty question of transparency about Tether (USDT), its resources and operations, Mr. Ohtamaa emphasized that it will increase over time: it is getting harder and harder to lie. However, Tether (USDT) remains vulnerable when it comes to hypothetical regulatory attacks (“police shutdowns”) or potential deals between Wall Street investment banks.
Bitcoiner and crypto educator Brad Mills agrees with Ethereans: Tether (USDT) looks so sustainable to him that its long-term decoupling from the USD price is next to impossible.
However, USDT quickly returned to the "normal" $1 level. In contrast, algorithmic stablecoins FRAX, MIM, and especially Tron’s USDD, as well as Eurocoin (EUROC), a low-cap stablecoin pegged to the euro, suffered more significant losses. Mr. Mills appreciates the aggressive work of Tether Limited and the rebalancing of the reserve portfolio structure in Q4 2022: Tether has been leading through this extreme contagion in the macro and crypto markets, reducing commercial paper and adding to their US bonds. As a result, Tether (USDT) has been sanctioned by opposing groups of Web3 players for its operations during the ongoing market frenzy.
https://u.today/crypto-veterans-praise-usdt-highly-amid-market-drama-why
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Tether: Zero exposure to Genesis or Gemini Earn
According to the latest news about Genesis today, Tether confirmed that it had absolutely no exposure to Genesis or Gemeni Earn. Tether tokens are 100% backed by their reserves, and the assets backing the reserves exceed liabilities. Tether has a strong, conservative, and liquid portfolio consisting of cash, cash equivalents, and U.S. Treasuries. Tether will continue to focus on securing these reserves.
It will be business as usual for Tether and will continue to put its customers first.
https://tether.to/en/tether-confirms-zero-exposure-to-genesis/
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Why the issuance of USDT ensures that there is no risk from FTX/Alameda
The failure of FTX/Alameda may well be a watershed moment in the history of the cryptocurrency industry. In addition to being one of the biggest failures in financial history, it set off a leveraged chain of failures across the industry.
While there is more to the story, and rumors of more rivals may emerge in the coming weeks, Tether wanted to tackle a topic that surfaced after FTX's debacle first.
Alameda is known to be one of the larger issuers of USD₮, so there has been plenty of discussion about whether Alameda's failure is a risk to Tether.
The answer is no. Here is why,
Tether issued
What does it mean to be a large issuer of USD₮? If someone issues a large amount of USD₮ and then goes bankrupt, does this increase exposure to Tether collateral?
When an institution sends USD to Tether to issue USD₮, Tether issues USD₮ at a 1:1 ratio, corresponding to the amount of USD sent to Tether. Tether then converts these dollars into reliable, liquid, and conservative collateral (US Treasuries, etc.).
All USD₮ is fully collateralized by Tether's reserves, and every USD₮ can be redeemed 1:1 with USD.
What does Alameda issue USD₮ mean? This means they sent USD to Tether, and Tether issued USD₮. These reserves are still held by Tether, they are not on Alameda's balance sheet. The collateral backing Alameda's USD₮ is also not on Alameda's balance sheet.
What can Alameda do with their USD₮? Their only option is to exchange any USD₮ they have for USD via Tether's exchange facility. This is the same as any other USD₮ holder in the world.
Loans, Leverage and Liabilities
Did Tether lend Alameda any USD₮ or other funds? No, Tether has no outstanding loans in USD₮, Tether's reserves, or any other funds.
The main problem facing countless other companies was that they lent Alameda various assets with impunity against illiquid collateral. With Alameda currently unable to repay these loans, there are holes in the balance sheets of these companies. This is not how USD₮ issuance works, nor is Tether engaging with Alameda in any way.
Is lending part of the USD₮ issuance cycle? The only time Tether engages in lending is, as shown in the Celsius example, when Tether lends USD₮ to select overcollateralized clients with extremely liquid assets. In our view, many lenders in the sector have been reckless in putting out large amounts of capital and accepting FTT (and other illiquid assets) and long-tail assets as collateral.
This is further validated by the fact that Tether’s operations have not been disrupted despite Celsius’ sudden relaxation. In fact, even in the highly volatile circumstances of Terra's crash, Tether was able to liquidate Celsius' collateral with such precision that Tether was even able to refund some of the collateral.
What about leverage? Leverage played a key role in FTX's dramatic liquidation. Does Tether engage in any leveraged activities, leveraged transactions, or collateralized lending against Tether's reserves?
The answer is no.
Tether does not make highly leveraged directional bets on digital assets as part of its operations.
Solana Suspension of Deposits
Binance recently suspended USDC and USD₮ deposits on the Solana blockchain. The same goes for OKX. why is it like this? Are there inherent risks with Solana USD₮?
No
USD₮ issued on Solana is the same as USD₮ issued on any other chain. The token simply represents a claim on the $1 Tether reserve and collateral. Alameda's substantial participation in Solana does not affect the fundamental dynamics of how USD₮ works and how USD₮ issuance works.
The move by these exchanges to suspend USD₮ deposits may simply be due to the close connection between FTX, Alameda, and Solana. If holders of USD₮ want to exchange Tether for USD₮, they can still do so. USD₮ on Solana is equivalent to USD₮ on any other blockchain, it is not issued by Solana, nor is it reserved by Alameda or FTX.
8 years of stable operation
Tether is designed to withstand the incredible volatility of the cryptocurrency market. While the FTX situation is unique in many ways, it does not represent a risky threat to Tether or USD₮.
Tether continues to function normally and processes conversions as they are requested. Tether has no exposure to FTX or Alameda (nor Genesis).
https://tether.to/en/why-usdt-issuances-ensures-no-risks-from-ftx-alameda/
