Tether, the stablecoin issuer, decreased its exposure to banks by removing billions of dollars of bank deposits during the first quarter of the year, leaving only $481 million in bank deposits compared to $5.3 billion at the beginning of the year. Tether stated that it took this step to safeguard itself against bank collapses, despite holding deposits at multiple institutions.
While Tether did not disclose which institutions held the deposits, it mentioned that it was prompted to withdraw after witnessing its competitors struggle amid the recent banking crisis. The funds withdrawn from the banks were transferred to U.S. Treasuries and overnight repos backed by Treasuries, with Tether now possessing $7.5 billion in overnight repos. Tether has announced that it intends to use a portion of its realized investment profits, excluding any unrealized price appreciation of its reserve assets, to buy Bitcoin (BTC). Tether plans to allocate up to roughly 15% of these profits towards purchasing BTC and adding it to the reserve surplus.
Tether may have opted to reduce its reliance on banks due to the concurrent failures of multiple American financial institutions. In March, within one week, three banks in the United States, namely Silvergate Capital, Silicon Valley Bank (SVB), and Signature Bank, failed. News of USDC stablecoin’s issuer holding $3.3 billion in reserves at Silicon Valley Bank caused the stablecoin to lose its peg to the U.S. dollar initially. However, it eventually recovered 7% and returned to $1.
What is Tether?
Tether’s (USDT) goal is to offer a cryptocurrency with less volatility by maintaining a fixed exchange rate of 1:1 with the US dollar. USDT is one of the most extensively used stablecoins, which are digital currencies anchored or “tethered” to FIAT currencies and built on blockchain technology.
Risk Warning: Cryptocurrency and NFT trading can be volatile and carries a certain degree of risk. Please remember to be mindful of the potential risks involved. CryptoNormie.com does not accept any liability or responsibility for any losses resulting from trading or buying/selling any tokens/coins or digital art/products mentioned on the website or social media. This article is not sponsored or advertised. DYOR before investing in any asset we write about. Thank you.
Crypto investors refer to people who still think with a traditional mindset and as a result have decided to stay out of the crypto market as “normies”. We are here to change that. CryptoNormie.com offers cryptocurrency, NFT and metaverse news with special category for new token listings. Follow us on social media to stay updated!