Tether (USDT), the world’s largest stablecoin by market capitalization, was one of the dollar-pegged cryptocurrencies affected by the collapse of the Terra ecosystem. Now, a year later, the stablecoin has regained its stable peg to the dollar and boasts one of the deepest reserves in the cryptocurrency industry.
Prominent Crypto Figure Calls Tether a ‘Precious Metal Power’
Gabor Gurbacs, on Friday, May 12, provided insight into the importance of precious metals to Tether’s financial setup. Interestingly, Gurbacs, the founder of PointsVille, called Tether’s USDT a “precious metal powerhouse”.
According to Gurbacs cheep, Tether Holdings Limited, the issuer of the USDT stablecoin, has placed substantial importance on gold, building a strong reputation in the industry. His tweet also reveals that USDT, the third largest cryptocurrency by market cap, has a staggering roughly $3.4 billion in gold reserves.
Tether Gold’s assets are around $3.4 billion. XAUT AUM is around $500mm. Tether is now a precious metals powerhouse.
Don’t underestimate the Tether team. High integrity and hard working team supporting Bitcoin, commodity technologies and financial inclusion. pic.twitter.com/0JPvNUk6n5
— Gabor Gurbacs (@gaborgurbacs) May 12, 2023
At the same time, Gurbacs noted that approximately $500 million supports the circulation supply of Tether Gold (XAUT), the stablecoin pegged to Tether gold. Furthermore, the amount of gold in Tether’s reserves far exceeds that of Bitcoin (BTC), which sits at around $1.5 billion.
From Gubarcs’ perspective, the diversity of USDT’s reserves, consisting of gold, cash, corporate bonds, BTC, etc., helps protect the stablecoin against potential market crashes and unexpected negative events. Given his advisory role within the company, it may be fair to view Gubarcs’ analysis of Tether’s financial strategy as an insider’s point of view.
Terra Collapse – One Year Later
In one of the most cataclysmic events in the cryptocurrency industry, the Terra ecosystem collapsed in May 2022, and its UST stablecoin lost its dollar peg. The ripple effect caused investors to lose faith in most dollar-backed assets, including Tether USD. This caused panic selling of these dollar-backed assets.
As a result, Tether’s dollar peg was momentarily broken, with the token sometimes falling as low as 92 cents. Furthermore, two months after Terra’s collapse, Tether’s market capitalization had shrunk by roughly $16 billion to $65 billion, an indication of massive withdrawals by token holders.
While this unfortunate event was an unexpected test of USDT’s resilience and stablecoins, as an entity, many would agree with the fact that Tether passed the test with flying colors. After all, USDT regained its parity with the dollar just two months after the crash.
Meanwhile, in terms of market capitalization, USDT has been on a strong comeback ever since. In fact, the USDT market cap currently stands at $82.9 billion, according to CoinGecko data. This means that the stablecoin is now closer than ever to its all-time high market cap of $83 billion.
Tether USD maintains dollar peg | Source: USDTUSD chart from TradingView
-Featured image by Wit Olszewski/Alamy, Chart by TradingView
