Tether (USDT) Survived the Crypto Carnage: Will the Peg Hold?

Tether (USDT) price has held quite steady in the past few years despite the significant challenges facing the industry. Unlike other stablecoins like Terra USD and Neutrino that lost their peg, Tether’s USDT has held at or near the set level of $1.

Tether fights all odds

Tether, the biggest stablecoin in the world, came under intense pressure as cryptocurrency prices. It also held well as large companies like Voyager Digital, FTX, and Celsius imploded. As a result, its stability has helped prevent a much deeper crash of digital currencies.

According to CoinMarketCap, Tether has a market value of over $68 billion, which is lower than its all-time high of over $84 billion. Still, its decline has been much better than that of other cryptocurrencies. For example, Cardano saw its market cap plunge to about $8 billion from its all-time high of over $90 billion.

A common concern among investors and traders is whether Tether will be able to maintain its peg. For starters, Tether Holdings, which is mostly owned by Bitfinex, ensures the stability of the coin by having collateral in a one-to-one basis. As a result, if you buy 20 USDTs today, you can easily convert them to $20 tomorrow.

Tether Holdings makes money by investing these funds in safe financial assets like America’s Treasuries. According to its latest audits, 82.45% of the Tether Holdings are held in cash and cash equivalents and other short-term deposits and commercial paper. Broken down further, 70.7% of these funds are in US Treasuries while 10.83% are in cash and bank deposits. 12.8% are in money market funds. 

On the other hand, other Tether funds are in corporate bonds, funds, precious metals, secured loans, and other investments, especially in digital tokens. As such, Teher Holdings makes a lot of money when interest rates rise.

Is Tether safe?

A common question is whether Tether is a safe stablecoin to own. In my view, I believe that it is a safe coin because it is audited by BDO, the fifth-biggest accounting firm in the world. As such, I believe that BDO would not risk its reputation by delivering untrue financials. 

Also, Tether survived the carnage that happened in 2022 as cryptocurrencies plunged and well-known companies went out of business. Therefore, there is a likelihood that it will survive for a long time unless a major event happens.

Still, I believe that stablecoin providers like Tether should be regulated as banks because of the important role they play in the sector.