Tether: the 16th largest holder of US Treasuries

[MrSpasybo]

Stablecoins are an important part of the crypto market: they are a store of value during periods of volatility, the simplest channel for money to flow into the crypto market and also a tool to improve liquidity^[1]. However, in recent years, the crypto community has often been concerned about the fate of USDT, the largest stablecoin with a capitalization of $95B and its issuer Tether because the company does not have a reliable proof of reserve report^[2]. We fear the consequences that will happen in case Tether has problems and USDT loses its peg like UST in 2022.

However, we forgot that all stablecoins are already the 16th Largest Holder of the U.S. Treasuries by the end of 2023^[3]. Currently, at the beginning of 2024, "Tether is the 16th largest holder of US Treasuries. At this point they are an essential part of the American financial economy", Anthony Pompliano said on Bloomberg^[4].

I was surprised with this information. Tether is actually bigger than I thought, maybe even the US government doesn't want Tether to collapse and USDT has problems:

• If Tether sells off all of the US government bonds that Tether is holding, the US economy will have problems.
• Stablecoin USDT has helped promote the USD extremely effectively to hundreds of millions of crypto users worldwide. BTC and ALTS prices are always fixed in USDT, which is USD.
• Many people do not want and do not have the opportunity to buy US government bonds, but we use money to buy USDT, then Tether uses our money to buy US bonds. Tether as a global capital mobilization channel to buy US bonds.

With the recovery and growth of the crypto market, I believe that USDT's capitalization will also increase and Tether's rank will soon increase, maybe they will enter the top #10 largest holder of US Treasuries this year if USDT capitalization reaches $300B^[5].

What do you think about Tether's position in the current economy? Are you still worried about the possibility of Tether collapsing in the future?
[1] The Role of Stablecoins in the Cryptocurrency Market: A Comprehensive Overview
[2] 3 Reasons to Be Cautious About Tether
[3] Stablecoin companies now 16th largest holder of U.S. treasuries globally – report
[4] Bloomberg Crypto 2024.01.23
[5] Major foreign holders of United States treasury securities

[masudginanjar]

What do you think about Tether's position in the current economy? Are you still worried about the possibility of Tether collapsing in the future?

It seems like I don't care about Tether, whether Tether goes bankrupt or the price dumps, I won't be affected because I don't own Tether.
I only have Bitcoin in my Binance wallet and Personal wallet, except I have USDT when I want to withdraw from Binance to a Mastercard card and I use USDT on P2P Binance.
I often see a lot of discussion about Tether on altcoinstalks so I have a little experience that Tether is a stable coin that is not truly stable and is not fully backed by real USD, this makes me unsure about HodL Tether.

[Charles-Tim]

We fear the consequences that will happen in case Tether has problems and USDT loses its peg like UST in 2022.

UST that was created by the same developers that created Luna that is now called Lunc? UST was an algorithmic stablecoin. All algorithmic stablecoin should not be trusted because they can depeg. Compare USDT to fiat-collateralized stable coins, like USDC when it depeg last year to $0.8 or so. Now USDC is back to $1.

If you have easy access to USD, it is better than a token that is pegged with its price. USDT is also centralized in one way or the other which has been another reason that I do not like the coin. But for little amount, you can hold while having the rest of your money in USD.

USDT is not USD but if USDT collapse, expect USD value to depreciate, but I do not know much effect it will have on the US economy. United States will not want USDT to collapse and it is not likely going to collapse. Even in the tough time, it did not collapse.

[MrSpasybo]

It seems like I don't care about Tether, whether Tether goes bankrupt or the price dumps, I won't be affected because I don't own Tether.
I only have Bitcoin in my Binance wallet and Personal wallet, except I have USDT when I want to withdraw from Binance to a Mastercard card and I use USDT on P2P Binance.
I often see a lot of discussion about Tether on altcoinstalks so I have a little experience that Tether is a stable coin that is not truly stable and is not fully backed by real USD, this makes me unsure about HodL Tether.

Perhaps because Tether is so big that the market is worried about the impact of its collapse, if any.
If Tether collapses, we will see a crisis in the crypto market: investor confidence evaporates as the largest stable coin goes bankrupt, Tether's BTC reserves will be sold, some miners Tether's BTC pool will be in trouble. At the time of UST bankruptcy, UST cap was only $19B but created panic and market decline. Currently USDT cap is $95B 😱
I think if Tether collapses, all investors in the crypto market will be in trouble as the prices of most tokens will decline.

UST that was created by the same developers that created Luna that is now called Lunc? UST was an algorithmic stablecoin. All algorithmic stablecoin should not be trusted because they can depeg. Compare USDT to fiat-collateralized stable coins, like USDC when it depeg last year to $0.8 or so. Now USDC is back to $1.

If you have easy access to USD, it is better than a token that is pegged with its price. USDT is also centralized in one way or the other which has been another reason that I do not like the coin. But for little amount, you can hold while having the rest of your money in USD.

USDT is not USD but if USDT collapse, expect USD value to depreciate, but I do not know much effect it will have on the US economy. United States will not want USDT to collapse and it is not likely going to collapse. Even in the tough time, it did not collapse.

Yeah, the UST-LUNA protocol caused the whole Terra ecosystem to have problems in 2021 and Do Kwon was criminally prosecuted.

I can be sure that if USDT collapses, the crypto market will not disappear but will be severely negatively impacted and will take many years to recover. Similarly, I also believe that if the amount of bonds worth $60B-70B in the hands of Tether were sold off, the US economy would be rocked.

[Peter90]

If Tether sells off all of the US government bonds that Tether is holding, the US economy will have problems.

Yes but also vice versa: US economy will have problems --> US Treasuries backing USDT lose value --> USDT loses value --> USDT loses its peg to the $

Since USDT is mostly backed by US Treasury USDT is a stablecoin which is stable as long as the US economy is stable

Many people do not want and do not have the opportunity to buy US government bonds, but we use money to buy USDT, then Tether uses our money to buy US bonds. Tether as a global capital mobilization channel to buy US bonds.

Exactly.
Through USDT the cryptocommunity worldwide finances the US government.

How do crypto people from Iran... Syria... Russia... China... feel when they learn that buying USDT they are financing the US government?

[Stompix]

With the recovery and growth of the crypto market, I believe that USDT's capitalization will also increase and Tether's rank will soon increase, maybe they will enter the top #10 largest holder of US Treasuries this year if USDT capitalization reaches $300B^[5].

Those are only foreign holders, there are also domestic ones, just as a thing, Apple alone owns 53 billions, Tether has about 56 billions according to their audit.

If Tether sells off all of the US government bonds that Tether is holding, the US economy will have problems.

Nope, not at all!
First there is the problem of how insignificant they are, at around 0.3% of all the treasury bills.
Second, all of Tether treasury bills are of short maturity, under 90 days so Tether is on a constant buy and re-invest spree, and if, again if they would ever care about it they would instantly freeze them, after all its their bills, but there is such a demand on the market since it carries a 5.41% return right now that you're going to find buyers for every single one!

But besides that, Tether needs to park its cash in something US denominated, how would a USDT backed by pesos or Zimbabwe dollars look like?
Imagine they dump those, they buy Chinese bonds and those drop to 0.9 to 1, how are you going to redeem your usd denominated coins?

[Peter90]

But besides that, Tether needs to park its cash in something US denominated,

how about USD

[masudginanjar]

Currently USDT cap is $95B
I think if Tether collapses, all investors in the crypto market will be in trouble as the prices of most tokens will decline.

This is also what makes me worried and I can't get rid of Tether coins when I withdraw from P2P Binance to Master Card.
There are a lot of Tether markets on Binance P2P and it's busier than trading Bitcoin or other altcoins, so I chose Tether for withdrawal.
But on the other hand, in various cryptocurrency forums, Tether has quite a big difference (perhaps more than 10%) from real USD for comparison with USDT, but there are many traders and investors who still HoDL Tether.
We have to be observant of various altcoins because there is always drama in the life of altcoins, we have to be careful of Tether.

[Stompix]

But besides that, Tether needs to park its cash in something US denominated,

how about USD

If you mean paper dollars then they had close to 9 billions in it and gone down to 2 favoring bills, but as a business it makes no sense to park that amount in cash.
Bills pay 5%  year, cash pays zero, tether is making billions by buying and selling bills while it pays no interest to the guys that hold USDT, as long as they have enough liquidity to prevent a bank run that would collapse its parity there is now way to bring this down.

And to be honest I think that the withdrawing from USDT to real USD is so little nowadays that can be ruled insignificant, traders like to keep USDT to be able to move fat and take advantage of swings, many users park those in their wallets, companies have zero reasons to go through the fees of turning them into cash so they might be pretty safe except an exceptional bank run!

[Peter90]

but as a business it makes no sense to park that amount in cash.
Bills pay 5%  year, cash pays zero, tether is making billions by buying and selling bills while it pays no interest to the guys that hold USDT,

I disagree Stompix
from the point of view of honest and transparent business it would make a lot of sense parking that amount in cash.


This is what they made their clients believe: that for each USDT there is 1 $ in a bank account. (This is still what many USDT users think)
Not doing it was ethically questionable (to say the least...)

Now we learn that when you buy a USDT you are
a) financing the US gov
b) financing Tether making Secured Loans (to whom?)
c) financing Tether's Other Investments (what investments?)
d) financing Tether's speculations in the precious metals markets
e) financing Tether's speculations with Overnight Reverse Repurchase Agreement (how many users in this forum know what that mean?)

What's backing USDT? Tether Reserves Breakdown


USDT users and the crypto community in general are convinced that each USDT is backed up by 1 $
Truth is each USDT is backed up by an array of assets which nobody knows the precise value of
The reason for that is that Tether doesn't offer independent audits


Why don't they do what they made the world to believe?
Because - as you rightly say - "Bills pay 5%  year, cash pays zero, tether is making billions by buying and selling bills while it pays no interest to the guys that hold USDT"

Making billions out of investing/speculating with the money of clueless USDT users while letting them bear the risks of those investments/speculations...
doesn't look like honest business to me...

[Stompix]

This is what they made their clients believe: that for each USDT there is 1 $ in a bank account. (This is still what many USDT users think)
Not doing it was ethically questionable (to say the least...)

Let's assume you're a business trading millions of of crypto a day and you need to sleep tight knowing they will always bee redeemable, so you would like to have those insured by
- a FDIC 250 000 limit in a bank , one like Silvergate for example
- treasury bills from a government that have never defaulted and if it will veer will then all banks would be gone anyhow
Your choice! 

Now we learn that when you buy a USDT you are
a) financing the US gov

Some might not have a problem with it

Making billions out of investing/speculating with the money of clueless USDT users while letting them bear the risks of those investments/speculations...
doesn't look like honest business to me...

And me and you and x and y is free to not use that business, simple as that!
I'm not here to defend Tether modus operandi you asked a question and I answered from a business point of view, the company I work has bought treasury bills (and we're in the EU) instead of cash since it makes no sense to keep that liquidity, my family buys bonds for short 6 months period because keep them in a bank is a 3 loss and when you talk about a small business with a 5-10% profit margin that's huge!

[MrSpasybo]

If Tether sells off all of the US government bonds that Tether is holding, the US economy will have problems.

Nope, not at all!
First there is the problem of how insignificant they are, at around 0.3% of all the treasury bills.
Second, all of Tether treasury bills are of short maturity, under 90 days so Tether is on a constant buy and re-invest spree, and if, again if they would ever care about it they would instantly freeze them, after all its their bills, but there is such a demand on the market since it carries a 5.41% return right now that you're going to find buyers for every single one!

But besides that, Tether needs to park its cash in something US denominated, how would a USDT backed by pesos or Zimbabwe dollars look like?
Imagine they dump those, they buy Chinese bonds and those drop to 0.9 to 1, how are you going to redeem your usd denominated coins?

+ Thank you for opinion!
I know that Tether currently only holds about $70B worth of bonds, much less than Japan $1T or China $700B, but if Tether sold all of these bonds it could create a worry in the whole market.

Anyway, I will feel better when Tether is still okay, I want the crypto market to be peaceful so that BTC and ALTS can grow and create ATH in 2025. After 2025, I will be ready for all the biggest drama possible in this market 😅

[IyemRoker]

I can't think whether I should support Tether or not because the proof is that Tether has a lot of markets and even every DEX and CEX market already has Tether in every trade.
Whether the matter collapses or not depends on the CEO of Tether, if the CEO of Tether no longer cares about Tether coins then it is certain that Tether will dump and go bankrupt.
But the fact is that up to now, Tether has become increasingly successful and its scope has become wider and I almost see that the coins that are being printed for stable coins are Tether coins.

[Stompix]

If Tether sells off all of the US government bonds that Tether is holding, the US economy will have problems.

~

+ Thank you for opinion!
I know that Tether currently only holds about $70B worth of bonds, much less than Japan $1T or China $700B, but if Tether sold all of these bonds it could create a worry in the whole market.

That's the main thing I was pointing, Tether doesn't hold govemermnt bonds it hold low maturity treasury bills, and the US doesn't really care if they go below 1:1 parity, this is not like for example Coinbase caring how much Bitcoin goes.
If both treasury bills and bonds are dumped en masse the first and only one to profit is the USA.

Imagine that China dumps all their bonds and the market and there are no buyers, it will drop to something like 40 cents to a dollar, or 20 cents to a dollar of bond like Argentina, and how will that affect the US? It will affect them in the best way possible since they would be able to buy back 1 trillion of bonds with 200 billions, so they won't have to pay China 1 trillion they could do it for 20% of that! Isn't this the best deal of the century? 

Let's assume you owe a bank 100k and that bank goes to an auction, sells your debt to the only bidder which is you at 20k! Is that a bad deal?
That's why no country will ever think of hurting someone by selling the debt at a discount, because you hurt your own pockets, and this is the reason why the US doesn't care who hold their debt, like what u gonna do?

If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.

China and Japan are the banks here! 

[MrSpasybo]

I can't think whether I should support Tether or not because the proof is that Tether has a lot of markets and even every DEX and CEX market already has Tether in every trade.
Whether the matter collapses or not depends on the CEO of Tether, if the CEO of Tether no longer cares about Tether coins then it is certain that Tether will dump and go bankrupt.
But the fact is that up to now, Tether has become increasingly successful and its scope has become wider and I almost see that the coins that are being printed for stable coins are Tether coins.

Tether is making billions of dollars every year thanks to its USDT business, they will not give up this business and sector easily. That's why I believe that Tether's CEO did not disappear or throw away Tether.

What I'm worried about is just Tether's proof of reserves, this is still a big problem even though Tether has hired a reputable auditing company.

That's the main thing I was pointing, Tether doesn't hold govemermnt bonds it hold low maturity treasury bills, and the US doesn't really care if they go below 1:1 parity, this is not like for example Coinbase caring how much Bitcoin goes.
If both treasury bills and bonds are dumped en masse the first and only one to profit is the USA.

Imagine that China dumps all their bonds and the market and there are no buyers, it will drop to something like 40 cents to a dollar, or 20 cents to a dollar of bond like Argentina, and how will that affect the US? It will affect them in the best way possible since they would be able to buy back 1 trillion of bonds with 200 billions, so they won't have to pay China 1 trillion they could do it for 20% of that! Isn't this the best deal of the century? 

Let's assume you owe a bank 100k and that bank goes to an auction, sells your debt to the only bidder which is you at 20k! Is that a bad deal?
That's why no country will ever think of hurting someone by selling the debt at a discount, because you hurt your own pockets, and this is the reason why the US doesn't care who hold their debt, like what u gonna do?

The US has reason to try to maintain bond prices because bond prices represent the strength of the economy.
Countries buy US government bonds because they believe bonds are valuable and safe assets. If bonds suddenly lose value, the US government can buy them back at cheap prices but they will lose the world's confidence in the strength of the US economy, which will lead to difficulties in the future when they wants to continue selling government bonds.
Bonds are a special debt, everyone wants their price to grow steadily.