Hot search keywords

Hot search keywords

Tether Alters ‘1 USDT for 1 USD Claim’, But It May be ‘Long-term Positive’ to the Crypto Market

Recently, an update on Tether’s official website triggers the crypto community abuzz with rumors the largest stablecoin USDT may not be backed 100% by USD.

Tether had previously claimed that 1 USDT was backed by 1 USD in reserves which causes “invariable doubt” among crypto enthusiasts. Last December, Bloomberg reported that Tether essentially had a dollar for every USDT on the market after reviewing parts of Tether bank statements.

However, in the new update, Tether suggests that its USD holding may not fully cover the supply of USDT.

“Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities…”

201903141256032519Although Tether insisted that every USDT is still backed by their reserves, shrewd crypto investors can still find that the change augments the risk of the cryptocurrency.

According to CoinMarketCap, the current market cap of USDT is $2.05 billion. Under the 100% USD reserve mechanism, Tether must deposit $2.05 billion in their bank accounts. Tether would play the role of fund custodian of USDT users. However, unlike traditional banks, Tether does not give interest to its users.

After the change has been made, Tether only has to put a portion of the US$2.05 billion in the bank and use the rest of the fund in other investment business. In the future, Tether perhaps may offer USDT holders some interest, but it also brings risks.

Nevertheless, if the company does the risk-management well, USDT can still peg 1:1 to fiat currencies under the current reserve mechanism, and this mechanism may bring more profit to the firm.

Interestingly, a popular columnist of 8BTC under the pseudonym Satoshi commented that Tether’s reserve update is actually a good thing for the crypto industry in the long term.

“At present, USDT dominate the stablecoin market which is quite ‘unhealthy’. If this condition continues for another 10 years, when ‘black swan’ events take place, the whole market would be crashed.

But from now on, people’s trust in the USDT will be reduced, its market share could be deducted, which means other stablecoins may get more share in the market, and eventually, a more decentralized stablecoin market can be formed. By then, any incident of a single stablecoin would not have so much impact on the whole market.”

Satoshi also believes that, when Bitcoin users occupy the main population and its value become stable, we can say Bitcoin is the best stablecoin. 1 BTC = 1 BTC, no anchoring.

COMMENTS(1)

  • 8BTCnews
    7 months ago 8BTCnews

    #Tether Alters ‘1 #USDT for 1 USD Claim’, But It May be ‘Long-term Positive’ to the #Crypto Markethttps://news.8btc.com/tether-alters-1-usdt-for-1-usd-claim-but-it-may-be-long-term-positive-to-the-crypto-market …

Please sign in first