Tether (USDT) market’s value fell 7.8% to $76 billion in the last seven days as cryptocurrency investors and dealers cashed out $7.7 billion following the incident of Terra stablecoin UST’s crash.
According to Tether’s latest reserves report from December 2021, the amount removed from the top stablecoin is nearly double the $4.1 billion it held in cash reserves at the end of 2021.
Tether’s peg with the US dollar is maintained by the firm behind the token backing USDT with assets such as cash, bonds, and Treasury bills, with the goal of ensuring that each token is backed by at least $1 in assets.
According to the most recent reserves report, the corporation has total assets of at least $78.6 billion, with cash accounting for about $4 billion or 5% of the total.
Despite the “bank run” situation triggered by the collapse of the algorithmic stablecoin TerraUSD (UST), which saw investors leave not only stablecoins but the whole crypto market for fear of collapse, the firm appears to be able to keep its cash reserves.
Tether presently holds 6.36 percent of its assets in cash, which amounts to nearly $4.8 billion assuming Tether’s reserves closely reflect the USDT market valuation, according to a separate transparency report updated daily.
Market panic prompted USDT/USD to trade below $0.99 on major exchanges on May 12, prompting Tether to publish a statement at the time declaring that all redemptions to $1 will be honored.
Tether’s Chief Technology Officer Paolo Ardoino claimed in a Twitter spaces conversation the same day that the majority of the company’s reserves are in US Treasuries and that it has cut its exposure to commercial paper over the last six months.
Tether has come under fire for its opacity about the assets in its reserve, with its first reserve breakdown coming in May 2021. The particular assets in which the corporation invests are still unclear in the public reports.
Circle’s backed by cash and US Treasury bonds
In reaction to the stablecoin incident, Circle’s Chief Financial Officer Jeremy Fox-Geen wrote a blog post on May 13 reaffirming that the 50.6 billion USDC in circulation was fully backed by cash and US Treasury bonds.
This obscurity with Tether, combined with the recent short-lived de-pegging, caused some investors to hurriedly switch their Tether for USD Coin (USDC), a popular US dollar stablecoin that was audited and already completely backed by cash and US Treasury bonds.
Investors are finding a safe haven in USDC, according to CoinGecko data. Between May 3 and May 17, the USDC market cap increased by 6.3 percent, or $3.1 billion in inflows.
