Tether is one of the stablecoins that many crypto investors trust when using it to hold capital in a digital asset that is decoupled from market volatility.
But after the sinking of TerraUSD, which had already shaken the confidence of the crypto community, established stablecoins are in turn facing embarrassing questions.
Paolo Ardoino, the CTO of Tether, plainly does not believe that Tether represents a systemic risk to the cryptosystem, but a recent WSJ article offers a somewhat different perspective.
Despite having assets of $67.74 billion, the corporation owes $67.54 billion in debt. Therefore, it is difficult to say that this level of liquidity coverage is adequate to avert the collapse of the house of cards in the case of market turmoil.
According to the research, Tether would technically be bankrupt if its assets declined by just 0.3%. While Tether promises the market that $7 billion can be made liquid in less than 24 hours, Monsur Hussain, an analyst at Fitch Ratings, sees a significant issue with the asset mix. $5.6 billion of that amount is held in digital tokens, the identity of which is unknown to the general public. Therefore, it is impossible to know with precision what risk potential lurks here.
To ensure better openness, Tether undoubtedly recruited the audit firm BDO Italia, but it will be months before we receive a report with accurate data.
