BOTS and the worries surrounding stablecoin Tether (USDT)
You may have noticed the news that has come out in the past couple of months regarding stablecoin provider Tether (USDT) and its reserves. Some companies even decided not to use the stablecoin anymore or minimize exposure to it. What is going on, and are the funds of BOTS users in danger?
Tether reserves are not transparent
Tether is the biggest stablecoin in the crypto market. A stablecoin is a cryptocurrency whose value is linked to the value of a fiat currency. In the case of Tether, that is the US dollar. So for every dollar, an investor receives 1 USDT. However, the problem is that it isn’t exactly clear if Tether truly keeps this real dollar in its reserve.
And with Tether’s market capitalization of $71 billion, regulators are starting to wonder how they should approach and regulate the company. Ideally, the company should have each dollar given by investors in its reserves, or at least in the form of other assets. Since the beginning of 2021, Tether has been mandated to disclose its reserves every quarter. These reports have shown that its reserves not only consist of dollars but also “Cash Equivalents & Other Short-Term Deposits & Commercial Paper.”
The uncertainty about what exactly covers the USDT in circulation is one of the reasons that companies such as Dutch crypto exchange Bitcoin Meester dropped Tether. In a recent Financieel Dagblad article, the exchange said it did this “to protect our users against the possible effects.” In a worst-case scenario in which Tether doesn’t have full coverage, a digital bank run could potentially lead to the fall of Tether and a crisis on the crypto markets. Tether’s USDT is used for most crypto transactions, and many investors and traders hold some USDT to buy and sell crypto quickly.
BOTS and the use of Tether
At BOTS, we keep a close eye on the markets and the safety of BOTS users in mind. As the stories about Tether reached the media, we decided to decrease our positions in USDT already in April this year to minimize the risks involved. BOTS is not dropping Tether entirely because it is the most-used stablecoin on the market. Using solely different stablecoins right now would likely result in higher spreads, meaning higher trading costs.
If you are interested in hearing more about our BOTS story or want to get in contact with our founders, please contact our PR team.