Can Tether follow the same steps as Terra?

Tether continues to dominate the world of stablecoins, and has expansion plans that include the use of remittances. Is this enough so that it doesn’t collapse?

With the crisis and collapse of Moon/Earth tThe entire crypto ecosystem went bankrupt, and so did the stablecoins What Tether were affected.

Tether in 2022, with the fall due to the collapse of Luna/Terra

Could it be that Tether (USDT) goes through the same thing? What would happen?

Tether in Latin America

“Although there are no robust studies that detail the share of each crypto, it is said that USDT represents 50% of the volume of stablecoins and those that follow arrive with 15%,” he said. Ignacio E. Carballocrypto & alternative finance lead in ME (USA) and director of the fintech ecosystem at the Universidad Católica Argentina.

Stablecoins had a strong welcome in the region. According to the CEO of Olmos Group Venezuela, Aaron OlmosAs of 2020, 24.5% of what was traded in crypto in the region corresponded to stablecoins.

Percentage of value sent to Latin America by currency

In addition to being the counterparty of the transactions of bitcoin (XBT), ethereum or others, in Latin America stablecoins have the potential to send remittances, which already represent 5% of the Gross Domestic Product (GDP) of the entire region, and more than 20% of that of many of the smaller countries, according to a Inter-American Dialogue report.

That is why for this Tether Limited launched the MXNT token, tied to the Mexican currency, to get a slice of this flow. Facebook with Novi is just starting its pilot plan in Guatemala.

Meanwhile, the Julian Colombohead of public policy of the currency exchange in bitsomaintained that stablecoins are highly valued in the crypto ecosystem by those who must send money to other countries or structure deferred payments over time, something that other currencies do not allow.

“In the case of Latin America, the sending and receiving of remittances represents a very important income for millions of families and, with stablecoins, these shipments are immediate, safe and with much lower commissions than traditional methods of sending money”, Columbus assured.

On the other hand, in Argentina the USDT and the other stablecoins play a key role for exporters of knowledge services who do not want to officially liquidate their dollars, due to the existing exchange rate.

Carballo explained: “The crypto market has already suffered these volatilities, but more than half of those who have crypto in Latin America bought them after the pandemic. And they had never experienced this volatility that was experienced in May. A good part of the people who entered was looking for stablecoins and its use case was not decentralization, remittances or going against centralization, but not having a stablecoin in an inflationary dollar context.”

Will Tether go down?

“Because of the liquidity and volume that USDT has, I see a loss of the peg (parity with the dollar) as very unlikely. There would have to be a catastrophic event, where people basically liquidate their entire position in USDT,” he told Bloomberg Line. Manuel Beaudroitco-founder of crypto exchange beautiful.

The specialist considered that if this eventual catastrophic event with USDT were to happen, as happened with Luna, “this could have a very negative effect on the ecosystem.” He also stated that, in his opinion, it is the governments that are looking for something like this to happen, since this stable currency “allows people to have an account in quasi dollars without the need to have dollars.”

Tether Limited has been fined in 2021 (for $35 million) in the United States for having lied about the backing of its tokens. The US Commodity Futures Trading Commission (CFTC) had determined that between June 2016 and February 2019, the company did not have enough dollars on its balance sheet to support all of the units. of the stablecoin that were in circulation, despite assuring that they were.

For much of the market there are doubts about how well audited this coin is. The positive thing is that on the official website you can find both the balances of each token and the reserves that the company has. A clarification: it is not that for each USDT issued there is a physical dollar, but that the amount is diversified in safe assets, such as US Treasury bonds (representing 55% of the liquid part), commercial paper and certificates of deposit (28, 47% of liquidity), other Treasury bonds (0.41% of liquidity) and deposited dollars (5.81% of liquidity), among others.

Tether Reserves

Beyond doubt, the positive thing for this stablecoin and for the other most important ones in the ecosystem is that it managed to pass the first litmus test that was presented to it, with the crisis of confidence generated by the Terra effect. However, the scare did not come for free. Until then, the market capitalization of USDT was US$83 billion, today it stands at US$72 billion.

Tether market capitalization

The future

Some analysts believe that it is possible that at some point Tether will lose its leadership in the stablecoin world: “The UCDC coin is hyper-regulated and has many more government guarantees than USDT,” Carballo said. And he added: “As things like what happened with Terra happen, it favors this type of actor. Today the one that is most used is USDT, but that could quietly change.”

On the other hand, and regardless of which one ends up reigning, some crypto market players have diversified their position in stablecoin, to bring peace of mind to investors, Bloomberg indicated.


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