Did Tether really “carry out” BTC? Normality is more likely to return

Very busy days for Bitcoin and virtual currencies in general. Apart from Elon Musk, what are the reasons for this fall in values, which someone is taking advantage of anyway?

Avanti Financial founder and CEO Caitlin Long says the recent release of Tether's data on stablecoin reserves may have contributed to altcoin sales last week.

In a series of tweets on Saturday, Caitlin Long said that Tether Holdings Limited's reserve allocation of Tether (USDT) was not invested in "short-term, low-risk liquid securities," but rather in trading assets. credit of “who knows what quality. This would have altered the risk in the virtual currency fund managers' portfolios and prompted them to sell to rebalance the risk.

What Tether Uncovered : This virtual currency, controlled by iFinex Inc. has released its reserves for the first time in full, showing that it only holds 3.87% in cash to back its cryptocurrency.

Tether would hold 76% of its cash and cash equivalents reserves in other short-term deposits and commercial paper, all certified in March. Commercial paper represented a 65% share, fiduciary deposits made up 24% of the category, reverse repurchase agreements 3.6%, treasury bills around 3%. Liquidity therefore reaches 3.87%. Beware that the "Cash equivalents" are not cash, because commercial cards carry a risk and so do the "Repo" (repurchase agreements).

The remaining backup on USDT consists of safe loans at 12.55%, corporate bonds, funds and precious metals at 9.96%, and other investments, including digital tokens at 1.64%.

Precious metals and safe loans are also variable values. So the backing of Tether does not consist of absolutely safe assets (money or US government bonds), if not for less than 7%. The rest is a mix of short and medium term assets that will be safe, but still have a level of risk. Hence Caitlin Long's speech on portfolio risk rebalancing when Tether is present.

Personally, this explanation does not completely convince me: for years it has been known that Tether does not have a one-to-one backing in cash. Indeed it is known that he had helped Bitfinex, controlled by iFinex itself, with 850 million on loan. So what it turned out is not a surprise at all, indeed, if it is, it is quite positive. If the coverage of Tether is the one reported it is safe enough, but not absolutely safe.

My feeling is that instead the 25% drop in BTC in 7 days is due to other more, let's say, structural factors. So this leads to several important consequences for the value of virtual currencies:

  • gradual decline in QE by several central banks, with a reduction in the flow of money that created the bubble;
  • fewer people at home with easy money (in the US, …) and an internet connection for trading;
  • slightly increased inflation which cuts the desire for investment without an immediate fixed return.

This is a bit more structural than the Tether news. It remains to be seen how he will respond that so far he has invested in virtual currencies.


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Did the article Truly Tether “carry out” BTC? More likely it is the return of normality comes from ScenariEconomici.it .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/veramente-tether-ha-portato-a-fondo-btc/ on Mon, 17 May 2021 08:00:40 +0000.