Following the example of the U.S. dollar and unlimited additional issuance, will USDT collapse?
After the outbreak of the epidemic, the U.S. stock market broke down for four consecutive times in history, the economy fell into the stage of collapse, and the financial crisis hit. In order to save the market and stabilize the economy, the Federal Reserve chose to start the money printing machine and print money frantically, and the global economy has entered a period of flooding.
Affected by several meltdowns in the US stock market, the 3.12 “black swan” event also occurred in the currency circle, with a single-day drop of 50%-75%, but unexpectedly, the number of Tether’s stable currency USDT has explosive growth.
The data shows that since March 12, Tether has conducted at least 18 additional issuances of USDT, with an average of 1.1 additional issuances per day, of which the number of single additional issuances is mainly 60 million USDT. The market value of USDT increased from $4.1 billion in early January to $4.6 billion, and further increased to $6.1 billion in the last days of March.
Spamming, USDT Premium to Hit a New High
We know that USDT is a stable currency anchored to the US dollar, which means that for every USDT issued, a deposit of USD 1 or more needs to be deposited in the bank. However, in the cryptocurrency market, the market price of USDT has been in a state of fluctuation. When the market fluctuates violently, there are different degrees of premium or discount due to the relationship between supply and demand. Previously, the premium of USDT was as high as 6%.
Tether Opens Unlimited Money Printing Mode
In the field of digital currency, stablecoin issuers are equivalent to central banks, exchanges and lending platforms are equivalent to commercial banks, and cryptocurrency investors are equivalent to consumers in the traditional financial world. The cryptocurrency market still follows traditional financial laws. When Tether, the central bank of the digital currency industry, started an unlimited money printing mode and frequently issued additional USDT, one could not help but wonder whether Tether was a sufficient US dollar reserve, and it was often issued without warning.
Asset Transparency Raises Doubts
Tether has always claimed that each USDT is backed by an equal dollar reserve. But no financial institution has ever been able to confirm this, and Tether has never publicly been independently audited by a reputable accounting firm. Tether’s lack of transparency is mainly due to its dealings with various gray assets, its inextricable links and cooperation with shadow banks around the world, and Tether has been scrutinized by regulators across the United States.
Thunderstorms are Like Avalanches
Tether has frequently issued a large amount of USDT without announcing transparent reserves and independent audits, just like the central bank printing money uncontrollably to inject water into the market. In addition to the influence of policies in mainland China, cryptocurrencies cannot be directly linked to fiat currencies. While USDT acts as an intermediate bridge, many Chinese institutions personally hold a large amount of USDT to realize alternative foreign exchange reserves and venture capital. With the regulatory storm and the ebb and flow of exchanges, it has become increasingly difficult for people to withdraw gold.
If the holder cannot convert USDT into fiat currency, or if the U.S. regulation leads to collapse of Tether, it will be a disaster for the cryptocurrency, and even the beginning of the collapse of the entire industry.