There are worries that Tether (USDT), which is the most popular stable-coin cryptocurrency, could face liquidity risk due to a sharp rise in the number of loans.
The Wall Street Journal (WSJ) looked at Tether Holdings’ financial report on the 1st (local time) and found that the company had given out loans worth $6.1 billion (about 8 trillion won), which made up 9% of the company’s total assets at the end of September. was said to be so. Up until the end of last year, it was worth $4.1 billion, but the number of loans has grown by nearly 50% in just 9 months.
The value of Tether is the same as the value of one US dollar. It has a high level of liquidity and stability because for every Tether coin that is issued, one dollar is held in reserve. But it is said that stability could be at risk if the number of loans keeps going up. Alex Welch, a spokesperson for Tether, said, “All of the loans listed in the report were given out in Tether coins.” He also said, “They are short-term loans, and the company has collateral.” But he didn’t say if the collateral also included other cryptocurrencies. The British Virgin Islands, where Tether is based, do not require the company to send in an audit report.
The problem is that the value of cryptocurrency has been falling out of control lately. Due to the bankruptcy filing of cryptocurrency exchange FTX last month, the price of cryptocurrencies has gone down in general, so it is likely that the value of Tether’s collateral has also gone down. This year, the price of Bitcoin, the most important cryptocurrency, has dropped by 63%. Investing.com says that Bitcoin is worth about $16,990 as of today.
A further drop in the price of cryptocurrency has also been brought up as a possibility, which has made the market nervous. Mark Mobius, the founder of Mobius Capital Partners, said on this day, “The US Federal Reserve (Fed) is pulling cash out of the market, and this has dried up market liquidity. ” He said, “It could go up to $10,000.” He got a lot of attention when he said that the price of bitcoin would drop below $28,000 in May of this year, when it was worth more than that.