Is Tether the black swan of the crypto market?
Hello SPIer's. Have you ever thought about what would happen if/when tether USDT becomes a black swan event? You might be thinking this is old news as Tether was investigated back in 2017-18 but this does not mean they will not be investigated again. Tether currently has a circulating supply of $63 billion and that worries me..., what about you? They increased supply by $20 billion a few months back and they are not slowing down meaning we are likely to see a USDT supply of over 9 digits sometime soon.
You should be worried. People know that Tether is not backed and it doesn't seem to bother people, reminds me of the FED and other central banks around the bank printing money into existence from thin air. We come to crypto to get away from the central banking system and the most used stable token in crypto turns out to be worse. When Tether launched, they claimed that each Tether was backed by 1 US dollar. When asked earlier this year to some its backing, here's all the information the $60 billion behemoths answered back with. This single chart looks to have been made up in 5 minutes on excel.
SPinvest weekly token breakdown is better than this. We can work out that 49.59% of Thether is "commercial paper".
Commercial paper is a common form of unsecured, short-term debt issued by a corporation. Commercial paper is typically issued for the financing of payroll, accounts payable, inventories, and meeting other short-term liabilities.
The actual cash amount held by Tether is a single-digit %. There are lots of different numbers out there ranging from 2%-24% and based on what I found, it's probably a single-digit % meaning every Tether is backed by less than 10 cents of US dollar.
When we look at who holds all the Tether, we find out that 60%-70% are held by centralized exchanges. The biggest holder is Binance with $17 BILLION worth of TRX Tether on its books, not a typo, and that's only their TRX tether holdings not including ETH and BSC versions. It's all funny money by the looks of it. Binance has seventeen billion dollars worth of Tether on its books? what does that make Binance worth?
This will blow your mind but on Binance alone, the leveraged futures trading market can generate up to $60 billion a day in volume. Because of the way this massive market is set, pretty much all trading is set/coded to run through USDT and this is what gives its use case, why Binance holds such a large amount and also why Tether doesn't really need to be trustworthy.
If Tether ever implodes, the crypto winter of 2018-19 will look like a walk in the park. Everything, I mean everything from A to Z in the crypto world will drop like a stone but not to zero. This would turn into one of the best times in history to buy BTC as it could drop back to under $500, there are enough fans boys involved with crypto to keep the BTC market cap at over $10 billion. It would however be a big stain on crypto's adoption speed but in the long term view, being held back 2-3 years doesn't seem so bad when your planning to hold for 10-20+ years and could be viewed as a crypto teething pain.
If you do not hold any Tether, you'll be affected based simply on the liquidity it provides to the overall market. No liquidity, people panic and panic in the markets mean selling in vast volumes. People selling in vast volumes into no liquidity results in a price free-fall for BTC/ETH and the rest. There are billions of USDT locked up in defi smart contracts, poof!
It would be replaced over time by a better stable token and prices would soon moon again but it would cause 1 hell of a black swan event. If it were to be replaced by another, chances are it would be USDC as it is known to be more trustfully and better managed than both USDT and BUSD. Today in the stable token market, Tether controls 61% of circulating stables, USDC has 22%, BUSD has 9% and all the rest together add up to 8%. I hope that by the time Tether implodes if ever, its market share will be much smaller resulting in maybe a grey swan event instead of a black swan. Grey swan event is something like China's yearly ban of crypto, haha.
Anyways, what do you think about Tether? Do you know that much about it? I know a little bit about it but not lots. SPinvest has exposure to it and I do personally as well but not that much for either.
Do you think it'll just continue on forever are will the Tether bubble pop someday. If you are interested to learn more, google is your friend and I think 20-30 minutes looking into this would be time well spent for anyone involved with crypto. Knowledge is power and all that, even if not used and the bubble pops, you understand why it popped 😉
Thank you for reading today's SPinvest post
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Tether has been questioned since early on. The pace of expansion is slowing, probably temporarily. It could be a massive point of failure. Of course, if people are spreading things out, the impact of Tether should lessen each day.
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Im hoping by the time it fails if ever, it's market share will be much lower than today. It should happen as new chains pop up. Every time we think it's slowing down, they print another few billion, haha. They say it's bullish for BTC if Tether prints :)
I do think the entire market would be hit and it would probably turn a lot of people away from crypto. In fact, I think we will see plenty of people questioning every other stable coin out there. Its something that needs to be addressed but at the same time, its tough to really see the after-effects.
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I dont understand how its hard to back a token. Like when you issue 1 million tokens, you have $1 million. You invest it earn 5% per year and your overheads are almost zero. You always have a million in the bank and you earn $50k for your troubles.
Now if you sold 1 Billion, it would be harder to invest but still, it blows my mind how these stables cant be backed. What do they do with all the money? Lambos, coke and women probably.
Good analysis. If the supply USDT can increase by $20b in a month it shows that it can still grow beyond this thereby forcing d price up.
Thanks for sharing
Yea, it can go up real fast. I think we'll see a circulating supply of over 100 billion soon.
Thanks for checking out the post and dropping some supportive feedback.
I saw Chico Crypto Youtube channel today did this same story line of the black swan Tether and I agree. I personally avoid USDT as it is a bubble waiting to burst. The FUD is real there.
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Never seen that channel, i watch Ivon Tech sometimes but not that often.
Yes, the FUD is real with this one. I reckon it still has a bit to go as it'll prob end in court somehow and the process will take years. I got a letter from Japan last week about my mtGox funds that were stolen 7 years ago. It's taking that long and it's still gonna take another yar are 2 I guess. Tether could be around a while yet but when she blows, it'll cause a crypto tsunami like we've never seen.
Wow that's historic to be involved in the Mt Gox saga. I like Ivan on tech channel. You will like Chico Crypto, he is a great detective.
Let's ride the tether implosion and tsunami when it comes, it could dump a few people lol.
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Precisely why I spread my stable coins out, I try to avoid Tether as much as possible, actually it's a reason I diversified out of Cub - they axed the USDC pool, so I transferred some funds to Panther where they have one!
There's something we share in common, i switched from CUB to Panther as well :)
Cant go wrong with spreading them out, i mostly hold BUSD atm.
Yes I have a distrust of Tether for sure!
I am keenly aware and have only $1K of Tether. Even more aware that the Regulators essentially have Tether over a barrel but for now see them as a Cash cow so long as they cough up the Fines and have their palms greased on a regular basis if Tether wants to stay in business or when their Handlers decide to totally hamstring the Crypto Market.
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If the tether market crashes, then each and every one of us here will suffer, as BTC has absolutely nothing to do with HIVE and btc falls and HiVE falls too, it's a chain effect, and with such a large market cap the noise will be greater.
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The problem I see is that Tether is still outgrowing the other stable coins, and that's not good at all. So yes, Tether imploding would definitely be a black swan event, or maybe not, since we already can imagine this potential scenario, and a black swan event implies that nobody saw it coming. I avoid holding USDT, but I use it in transfers. When I can, I prefer USDC - although it's still a centralized option.
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Recently, since 3 months or something like that, I have completely switched from USDT to USDC because of this. I was reading about coins for LBI and came across this USDT thing. I don't remember the numbers exactly. But for what I could see is that it was definitely NOT fully backed.
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