Tether has long faced questions about whether he has enough assets to justify his attachment to the dollar.

Tiffany Hagler Bloomberg via Getty Images

Tether, the world’s largest stable coin, regained its commitment to the dollar after more than $ 3 billion in tokens left the system in one day.

The cryptocurrency – which should always cost $ 1 – sank to 95 cents on Thursday and struggled to climb back to its projected fixed value for the dollar.

Until Friday, tether was again trading steadily at 1 dollar, calming investors’ fears of a possible infection of the crypto market from the collapse of the Terra stablecoin project.

TerraUSD, or UST, is different from tether in that it relies on a complex combination of code and a sister token called luna to stabilize its price. It was also partially backed by billions of dollars worth of bitcoins.

Tether, on the other hand, is supposed to be secured by cash, short-term debt obligations corresponding to the equivalent amount of dollars deposited by its users. These assets are kept in a reserve managed by a company of the same name.

In essence, this is like a bank account for crypto investors, who often turn to tying in times of increased market volatility. Much of the bitcoin trade takes place in tether.

Tether already has a turnover of about $ 79.5 billion, down from $ 82.9 billion 24 hours earlier. which suggests that the company behind it has processed over $ 3 billion in repurchases in just one day.

Matt Greenspan, CEO of Quantum Economics, said the Terra disaster had shaken the crypto market’s confidence in other stable coins, such as tether.

“DeFi [decentralized finance] the market is certainly very much based on prescriptions that stablecoins can stay stable, so if things start to unravel, it could be potentially catastrophic for the industry, “he said.

Paolo Ardoino, Tether’s chief technology officer, took to Twitter to reassure investors about the reliability of his company’s stable coin.

“We had almost $ 3 billion [in] redemption and they were liquidated quite quickly through our banking channels, “Ardoino said in a one-hour live audio conversation on Twitter Spaces on Thursday.

Repurchase requests range from a minimum of $ 100,000 to $ 600 million, he added.

The problem with Terra’s UST, Ardoino said, is how fast it’s growing.

“It’s all fun and games until you become a solid $ 10 billion coin,” he said. “Until you become a $ 5.10 billion stablecoin, even if you have some liquidation because you’re backed by a little moon and a little bit of bitcoin, today’s crypto markets can still take that.”

“But if you start doubling the amount to $ 20 billion stablecoin … there’s no way the market can take on that kind of liquidation,” Ardoino added.

Tether has long faced questions about whether he has enough assets to justify his attachment to the dollar. The company said earlier that all its tokens were secured one-on-one with dollars held in reserve.

However, following an agreement with the New York Attorney General, it was revealed that Tether held a number of other assets – including commercial paper, a form of short-term, unsecured debt – to support his symbol.

Since then, Tether has reduced the number of commercial papers he holds, and says he plans to further reduce the amount over time. More than 52% of Tether’s assets are already in US government securities, and this is expected to grow even more when the company reveals the breakdown of its reserves, Ardoino said on Thursday.


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