$10 Billion In Withdrawals – Tether Collapse Imminent?

0

Last Updated on 24 May 2022 by CryptoTips.eu

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
View all posts

Like many wealthy businesses, the world’s largest stablecoin Tether relies on accountants and lawyers from places with tax rulings more favorable than the market where it mostly operates (or why do you think Apple used to have it’s European headquarters in Dublin).

As such, it was not too surprising that the Tether management decided to publish a letter form MHA Cayman, the island offshore department of a mid-sized accountant firm normally operating from London (MHA MacIntyre Hudson) last week, proving that it is stable and not in need of any sort of cash injection soon. Fear had crept into crypto markets after the Terra collapse.

The document stated that Tether currently holds some 82.4 billion dollars in assets, mostly invested in commercial paper, bank deposits and US treasury bills, all quite stable. Problem for Tether is that the document, released quarterly, was dated 31 March, long before the collapse of Terra and its stablecoin. Ever since then, Tether had seen withdrawals of $7 billion apparently, and if The Guardian is to be believed, that amount has by now grown to $10 billion.

Whenever there’s a failure or a catastrophe in crypto, the fear is always that someone will misread the situation and overcorrect in a position that’s not helpful for the entire community writ large.

Kathleen Breitman of the Tezos blockchain admitted to CNBC when asked about Tether’s cash position.

Advertentie.

Slow burn

Furthermore, if we look at Tether’s balance sheet, some $7bn of their stated reserves and assets on 31 March were in “corporate bonds, funds & precious metals”, and “other investments (including digital tokens)”, read other cryptocurrencies.

Although this is a relatively small portion of the company’s reserves, you can be sure that given the recent market fluctuations and the loss of several crypto coins by double digit percentages, a fair amount of this is gone.

Patrick McKenzie, a fintech commentator, declared for example that:

Tether has invested $62.8m of the reserves into Celsius network … Celsius is in free-fall due to the current market dislocation; the value of their native token is down by over 86%.

Clearly, that investment has suffered more than $20m in impairment. Impairment of 1% of one line item on their balance sheet ate more than 10% of their equity.

If you add this all up, the world’s biggest and most popular stablecoin seems to be be faced with a slow burning bank run where someone is withdrawing some $500 million per day.

valik4053022 / Depositphotos.com