Uncertainty Starting from FTX... Even Market Leader Tether 'Wobbles'

Publisher Loan Volume Soars 49%
Collateral Soundness Issues Emerge

[Image source=Reuters·Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Tether (USDT), the stablecoin recording the highest trading volume among all virtual assets, is faltering. Concerns are spreading in the market that Tether, the issuer, could face a liquidity crisis due to a significant increase in its loan size.

According to CoinMarketCap, a global virtual asset market tracking site, USDT's daily trading volume has been on a downward trend since September 1, when concerns about Tether's stability were raised. After being recorded at $29.91354 billion (approximately 38.8576 trillion KRW), it decreased by 11.81% to $26.38078 billion the next day, September 2. On September 3, it shrank further to $20.6926 billion, the lowest daily trading volume since July 20, 2020, when it was $16.92017 billion. Within two days of the issue being raised, the daily trading volume plummeted by 31.10%.

USDT is one of the stablecoins designed to be pegged (fixed) to fiat currency. It is fixed to the US dollar and has low volatility, so it is mainly used as a means of trading virtual assets and has the highest trading volume among all coins.

However, the loan size of Tether, the issuer, surged by 48.78% from $4.1 billion at the end of last year to $6.1 billion as of the end of September this year. This accounts for nearly 9% of Tether's total assets, and Tether has also accepted virtual assets as collateral for loans. This has raised concerns about the soundness of the collateral. However, Tether has not disclosed the proportion of coins among the collateral. Tether claims that it has received collateral with sufficient liquidity and that the loan terms are short-term, so there is no problem. Nevertheless, due to the collapse of coin prices following incidents such as the global exchange FTX crisis, concerns remain high. For example, Bitcoin was priced in the $47,000 range at the beginning of this year but remains in the $17,000 range as of this date. The price plunged due to the combined effects of the Terra-Luna incident, interest rate hikes, and FTX's bankruptcy protection filing. William Vandenberg, an accounting professor at Charleston University, said, "It is uncertain whether Tether's claim that it can maintain its value at $1 will hold true even in a crisis situation."

As concerns about USDT, which holds the largest market share, have emerged, the number of transactions using stablecoins has also declined. According to data from virtual asset data firm CryptoQuant, the total number of stablecoin transfer events on September 3 was 173,691, down 24.85% from 231,136 the previous day. The number of transfer events indicates how active stablecoins are on the network.

This content was produced with the assistance of AI translation services.