Tether (USDT) is the leading cryptocurrency stablecoin pegged to the U.S. dollar and backed “100% by Tether’s reserves.” The quality of its reserves has been a hot topic in the crypto scene over years. An investigation by Dirty Bubble Media delves into Tether’s secured loans operations, questioning the quality of their reserves. It should be noted that Dirty Bubble Media has always been one of the fiercest critics of Tether and therefore the analysis must be taken with a pinch of salt.
Tether is used by investors who want to avoid the volatility typical of cryptocurrencies while holding funds within the crypto system. As of January 2023, Tether was the third-largest cryptocurrency after Bitcoin (BTC) and Ethereum (ETH) and the largest stablecoin with a market capitalization of nearly $68 billion.
Tether updates a breakdown of its reserves holdings daily on its website. As of Jan. 29, 2023, it reported assets of $67.8 billion for USDT. Allegedly 82.45% of its reserves is in cash, cash equivalents, short-term deposits, and commercial paper; 4.69% in corporate bonds; 9.02% in secured loans to unaffiliated entities; and 3.85% in other investments, including crypto tokens. While Tether promotes that it backs every USDT with an equivalent amount of currency, this isn’t entirely the truth, as the numbers above show.
Utilizing data from the Celsius Network bankruptcy and Ethereum blockchain analysis, the Dirty Bubble Media report identifies Ethereum addresses linked to Tether’s loan interest and principal payments. This research corroborates with Tether’s own disclosures and suggests that their loan portfolio accounts for a significant portion of their reported secured loans in 2021, and about 20-30% as of their latest attestation.
The investigation highlights that Tether’s reserves, unlike its competitor USDC, consist of various assets including Chinese commercial paper, Bitcoin, precious metals, other investments, and secured loans to non-affiliated entities. The analysis of Tether’s loan book, previously shrouded in secrecy, was made possible through blockchain data and statements from insiders. Entities like Babel Finance, Nexo, Three Arrows Capital, and Amber Group were identified as borrowers.
The study raises (again) questions about the true nature of Tether‘s reserves and the impact of its loan activities on the crypto market, especially in light of divergences in reported loan balances from mid-2022. This investigation provides a rare glimpse into Tether’s loan operations, contributing to the ongoing discourse about its reserve transparency and stability in the cryptocurrency market.
For a comprehensive understanding of the findings and implications, readers are encouraged to refer to the original article on Dirty Bubble Media: to to the article here.
