decrypt.co Arkham Intelligence data—which tracks the crypto giant’s wallet—reveals that the company now holds over 75,354 Bitcoin, worth more than $5.1 billion as of this writing, after the firm bought 8,889 BTC in the first quarter of this year. Tether said last year that it would regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin. The idea is to use the asset to hold in the reserves it uses to back its stablecoin. ********* Does this makes sense? How can you use Bitcoin to back the stablecoin? Shouldn't it be the other way around? What should happen if Bitcoin drops significantly (like nearly 80% we saw in the aftermath of 2021 crash)?
Using Bitcoin might be based on its expected long-term value rise or to diversify reserves. Yet, a significant drop in Bitcoin's value could risk the stablecoin's stability.
Think about it. If you have 90% t bills and 10% bitcoin (these aren’t the real numbers) to back a stable coin, as long as over 90% of the outstanding stable does not redeem you wouldn’t have to touch the bitcoin It is my understanding that tethers bitcoin holding are in excess of liabilities (amount of tether outstanding) anyway.
Who knows, they might be thinking of using Iranian Rial, Ugandan shilling ... to back the stable/unstable coin.
Easy. Tether issues Tether tokens Tether uses the new Tether tokens to buy Bitcoin Now Tether is backed by Bitcoin Tether issues Tether tokens Tether uses the new Tether tokens to buy Bitcoin Now Tether is backed by more Bitcoin ... What could possibly go wrong?
But, from what I've read, every USDT token that's issued to the public is to be backed by an equivalent amount of fiat. This is, in theory, supposed to make USDT resistant to market volatility. But how is this possible when it's backed by Bitcoin? This is especially troublesome because the USDT they issue will ultimately be used to buy Bitcoin. So this would be a double whammy if the market ever crashes.
At the very beginning they claimed that for every tether, there is 1 USD in their bank accounts. But then they were caught lying, and they had reserves only 25% of the time (in a period of 1-2 years). That's what they received the sentence from CFTC and the settlement in the NYAG. And back then, the Tether marketcap had been around $2B. Now it's more than $100B. They have been promising a financial audit for 7 years. Why can't they produce one? They are claiming that they have always been able to redeem the dollars. Their CEO at the time answered to the question whether can he guarantee the redemption at dollar value forever, he said "I can't guarantee anything, but i believe we will be able to." I don't believe they are sufficiently backed. Their dollar peg is artificial. Just look at luna's UST. It would have collapsed a year earlier, but trading firms allocated money to restore the peg(so they could sucker more money out of the system)... The same goes for Tether in my mind. They keep it pegged so the cash cow can be milked further. Don't kill the goose that lays golden eggs. At some point though, it's likely to burst.