Tether (USDT) restores confidence

News / Tim Stolte
Tether restores confidence with more transparency about collateral.

After last week’s stablecoin market destabilisation, it seems that Tether, the company behind the largest stablecoin (USDT), has managed to restore confidence. In a report the company announced that the stablecoin is backed in large part by very liquid assets.

There have been plenty of controversies in the past about Tether’s reliability and the backing of USDT. To restore trust, Tether would publish a report each quarter explaining the composition of its collateral. A year ago, not less than 49% of this collateral consisted of securities of unknown origin. For many investors this report was far from reassuring, and Tether promised to reduce this allocation.

The report published this quarter, which was signed by an independent accounting firm, showed that the collateral consisted of securities for only 24% at this point. Furthermore, the creditworthyness of the securities was rated higher. Over 6% of the backing falls under the category of “other investments”, which include other cryptocurrencies. This is seen as the largest risk factor, due to the ambiguity of the origin of these assets.

Because of the relatively high risk investments that Tether does, USDT is still seen as more risky than its direct competitor USDC. The latter is, according to the most recent numbers, backed by at least 61% of cash and cash equivalents, while the backing of USDT only has 13% in this category. Due to this, among other reasons, the value of USDT dropped to $0.95, while USDC managed to steadfastly keep its $1 peg.

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