With a market capitalization of 66.23 Billion The US dollar represents the digital currency USDT, a broad functionality in the crypto sector.
In terms of volume, Tether is constantly in the first place of cryptocurrencies and thus secures the functional operation in the entire ecosystem of cryptocurrencies, even in more difficult phases.
General Information about Stablecoin Tether (USDT)
In the past, voices have often been raised about the security of the digital currency tied to the value of the US dollar.
Through the Adjustment of its asset holdings Tether would like to satisfy investors and market observers and Transparency create.
In this article, we look at what changes the company Tether has made and what exactly this means for the holders of USDT and the crypto market in general.
Overview of the largest stablecoins by market capitalization
What is a Stablecoin? What is the role of USDT for the crypto market?
At the beginning, we want to briefly explain what exactly a so-called stablecoin is.
Stablecoins are digital currencies that maintaining a constant value or should be maintained. While increased volatility is in the nature of cryptocurrencies, stablecoins are intended to provide a safe haven for investors.
Stablecoins will also provide the investor with the Access of conventional fiat currencies the crypto world put in place.
What are Stablecoins? – Definition, Explanation &Meaning
Stablecoins play an important role in the crypto ecosystem. In this article, you will learn what stablecoins are, as well as their meaning and explanation.
A detailed explanation of stablecoins can be found in this article
Due to the Value stability Stablecoins also provide a Most of the trading volume within the crypto space.
In addition to trading per se, stablecoins can also be deposited into central or decentralized protocols to generate crypto interest and thus Return in the form of lending or liquidity mining.
The Role of Tether (USDT) in the Crypto Market
Tether is a cryptocurrency responsible for the company of the same name, Tether Limited, whose value is stably pegged to the US dollar.
Either of Capitalization of more than $66 Billion lists Tether at rank 1st of all stablecoins and as a total third largest cryptocurrency, after Bitcoin (BTC) and Ethereum (ETH).
Development of the market capitalization of the stablecoin USDT (Tether)
At the current time, Tether (USDT) dominates, with a Market share of 45 percent, measured by the cumulative total market capitalization of all stablecoins, the market is unambiguous.
Market share of Tether (USDT) in the entire range of stablecoins
This makes USDT and its stability and security all the more important for the entire crypto ecosystem.
With the potential occurrence of complications and other missteps with USDT, as they occurred with Terra and their coin UST, the implications for the crypto sector would be devastating.
Japan: Stablecoin Law requires 1:1 withdrawal against fiat currency
Japan is the first country on Earth to enact a stablecoin law that requires a 1:1 payout of the coin against the fiat currency shown.
The latest news about Stablecoins in Japan can be found in this article
The company Tether uses the capital in the form of USDT to invest in various financial instruments To achieve a returnwhile the owners of Tether receive an asset that reflects the value of the US dollar.
The individual positions of Tether (USDT)
With the news at the time about the possible collapse of the real estate giant Evergrande from China, the fears of crypto investors grew to what extent the stablecoin Tether (USDT) could be affected.
But how exactly do such relationships affect Tether?
To do this, we look at the document published by Tether on Asset allocation from USDT in more detail.
Breakdown of the individual positions of the USDT stablecoin, last update 31.03.2022
Here we can see that with 86 Percent a large part of the reserves of the USDT Tether stablecoin are deposited in cash and cash equivalents as well as other short-term deposits and so-called commercial papers.
In the lower half of the graph we see once again the detailed breakdown.
More than half of the position is represented by U.S. Treasury Bills.
U.S. Treasury Bills are a secured by the Ministry of Finance short term Debenture the US government with a term of one year or less.
These can be classified as safe in the macroeconomic context of the financial markets.
On the other hand, we see that with 28.50 percent and an overall position of 25 Percent, the so–called Commercial Paper and Certificates of Deposit – trading papers and certificates of deposit account for a quarter of Tether’s reserves.
Price deviation of USDT in the past to the 1 US dollar mark
These commercial papers are a commonly used type of unsecured, short-term debt instrumentswhich are issued by companies.
Thus, these must be considered as high risk in particular, considering how important the stability of the stablecoin Tether (USDT) is for the entire crypto ecosystem.
Because of the increased risk of default, the Tether reserves and thus the safeguarding of the value stability of USDT with an increased proportion of commercial papers are at risk.
$5 billion reduction in commercial paper assets
On July 01, the company announced in a press release that the assets of the commercial papers will be transferred from a current portfolio of 8.4 billion US dollars to a Low of $3.5 billion will reduce.
In this regard, the Commercial Papers worth $5 billion on July 31 expire and no more new ones will be added to the reserve stock.
Tether particularly emphasizes its Commitment to the crypto sector and expresses itself in the official statement as follows:
The goal remains, the number [der Commercial Paper] to bring it to zero. While both commercial paper and treasury reserves are usually cash and cash equivalents, U.S. treasuries will now account for an even larger percentage of Tether’s reserves.
This is part of a broader strategy to ensure that Tether has a diversified portfolio with restrictions on exposure to individual issuers or assets. It demonstrates the company’s commitment to reducing its commercial paper investments and validates the business as part of its ongoing quest for greater transparency for the stablecoin industry.
In the current time of the bear market, the bankruptcies of many companies and general uncertainty, Tether’s approach with the adjustment of the reserve allocation represents a quite positive development for the entire crypto market.
It remains to be seen what developments will occur in the future.
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