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$USDT Can’t be Redeemed 100%, It is Less Probable to Collapse Says Jun Yu

Written by: Elena R

May 22, 2022

The collapse of crypto Luna and its associated terraUSD stablecoin were really Unexpected. whereas many of us were unknown to UST before, and what actually the stablecoin stands for. It’s a big deal, as billions of dollars in crypto wealth have been vaporized by their diving shockwaves throughout the market.

Looking at the graph of the Cryptocurrency market nowadays, it looks unsafe in all possible directions. As Bitcoin and ether are at their lowest point since 2020, altcoins, dogecoin, and  Cardano are falling even worse.

Virtual Currency volatility, and tempestuous economic conditions are affecting not just cryptocurrency, but also the stock market. This unprecedented dive is really painful for crypto investors. 

The founding partner of ANT Capital, Jun Yu, tweeted about the risk associated with USDT still and cannot redeem USDT 100%. The collapse of USDT due to a run is really small. According to a recent report Tether currently has more capital than debt, the value of reserves is greater than the market value of the issued stablecoin. 

Tether currently holds assets worth $82.4 billion and liabilities worth of $82.2 billion. Even though Tether’s assets are greater than the liabilities on the books, it did not take liquidity risk into consideration while valuing its assets and making expected trust loss reserves and splitting its assets. And it is impossible to eliminate these risks even after the formation. 

Further, A recent audit report states that 85.64% of Tether’s assets have relatively good quality liquidity. The proportion of cash still remains low, accounting for less than 5%, and more are US Treasury bills which is almost 47.56%, commercial papers, commercial paper certificates of deposit, currency funds,etc. And another 14.36% of assets are from other investments, corporate bonds, funds, precious metals, and secured loans. 

considering the safety factor of these 85.64% assets is still doubtful. Cash, U.S. Treasury bills, and money funds are relatively safe, but the commercial paper and certificates of deposit are to be more worried about the safety. They are still associated with liquidity risk and default risk, even though they have 44 days to maturity with an average rating of A-1. 

The remaining 14.36% of Tether assets fluctuate more, and more than 60% of Tether assets have good quality and are realized in a short time to meet the redemption demands.

But, many small currency holders do not even have US dollar accounts and Thether’s assets will not be able to redeem all stablecoins in full. Hence, it is impossible to redeem USDT 100%. 

Elena R

Elena is an expert in technical analysis and risk management in cryptocurrency market. She has 10+year experience in writing - accordingly she is avid journalists with a passion towards researching new insights coming into crypto erena.

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