February 6, 2023

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USDT is the most traded crypto asset acting as a reliable intermediary for many transactions on numerous exchanges. Conceived as a stablecoin that retains parity with the USD, it is still one of the foundational blocks in the industry that allows many institutions and unsure investors to enter the market with some semblance of confidence.

Tether is experiencing a very troubling period with its assets falling by nearly 20% compared to $82 billion in March 2022. While not a sign of total collapse, users’ confidence is notably reduced. Tether has $66.4 billion in assets and $66.2 in issued tokens. Nearly $29 billion is held in US fiat bills.

Many institutionalized investors and skeptics are worried about the current state of affairs with USDT following the same path paved by Terra Luna whose demise was a shocking event for the whole crypto community. From one of the most traded coins to an asset with non-existent value. Should we expect the same from Tether?

Recently, Tether decided to partner with BDO LLC, the fifth largest provider of accounting services in the world. The move from offshore vendors to an internationally recognized partner is a good idea on paper, but the timing feels off. With the commotion in the market and many investors doubting Tether’s ability to keep 1-to-1 redemption with USD, some may see the shift as a way to keep up the customer confidence.

On the other hand, Tether’s investments in various coins that did not prove their potential are another factor driving up doubt. With over $5 billion invested in “other projects”, the total portfolio of assets held by Tether is worrisome to many analysts that do not want to see the company invested heavily in a market that has been spiraling down for a while losing over 60% of value since during the second quarter of 2022.

Unlike Terra, Tether Holdings is a centralized entity making it more able to sustain a long bearish market. However, everything has its limits. If USDT were to collapse, we would see catastrophic, possibly unmendable, consequences.

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