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Tether maintains its bond based on its fiat reserves and not through an algorithmic model. Since its inception, there have been doubts that Tether holds the same dollar reserves as the USDT in circulation, which currently stands at $ 82.8 billion.
Investigations by the New York Attorney General in February 2021 revealed that Tether’s reserves consist of cash-like assets, including treasury notes, commercial paper and certificates of deposit.
Since these are more illiquid than cash, a run where Tether is exchanged for dollars could pose a problem for the company. However, Bitfinex/Tether CTO Paolo Ardoino tweeted that USDT withdrawals had been honored without “effort” in the last 24 hours.
Tether remains the largest stablecoin by market capitalization. A significant loss of the bond could trigger a crypto ice age.
In addition, distinctions were made among the various stablecoin types. For example, asset-backed were considered “safer” than algo alternatives. However, the current situation shows that all stablecoins are vulnerable.
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