Stablecoin Watch: How Safe is Tether?
- By Bilal Hafeez and Dalvir Mandara
- 3 min read
Summary
- We find the reserves of Tether (USDT) are not fully in cash equivalents. There is a sizeable allocation to crypto markets.
- Stablecoin yields are no longer high compared with yields in traditional markets such as dollar currency pegs and money markets.
- With the Fed raising rates, stablecoins could become less attractive.
How Safe Is Tether?
After the TerraUSD/Luna collapse, all eyes have been on whether Tether (USDT) can maintain its peg. And at least over the past week, the answer has been a clear yes. This suggests speculators have moved away from attacking the coin. Nevertheless, the market cap of USDT has fallen by $1bn over the week, suggesting outflows are continuing. In contrast, the USD coin’s (USDC) market cap increased by $0.9bn over the same period. This suggests investors are rotating from USDT to USDC.
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