As the cryptocurrency market experiences heightened volatility, digital stablecoin Tether is emerging as the “least risky” asset for investors. With a regional US banking crisis and a regulatory crackdown on crypto firms, the cryptosphere is witnessing a shift towards tokens and coins that are perceived as relatively safe.
An Overview of Tether’s Performance
According to a Reuters report, Tether has gained the top position as the best-performing stablecoin in the current market. This digital token is tied to a fiat asset, specifically the US dollar.
Tether’s value is supported by a reserve of dollars and has a cap on the total supply of about 85 billion tokens. The coin’s peg has remained above 1 since mid-April, reaching 1.002 last week due to intense demand from investors.
Presently, investors are treating Tether as a safe store of value, a transfer tool between cryptocurrencies, and collateral for derivative trades. It has a market cap of $82 billion and accounts for 6.83% of all tokens listed on CoinMarketCap’s database of 23,891 tokens.
Tether’s Official Report
Tether Holdings Limited has officially published an assurance report for Q1 2023 based on the findings of BDO Italia. The data released on Wednesday last week confirms the accuracy of Tether’s Consolidated Reserves Report (CRR) covering the first quarter of the year that closes on March 31.
The CRR provides extra categories, including Tether’s physical gold, Bitcoin, Overnight Repo, and Corporate Bonds holdings, with the aim of increasing transparency in its reserves reporting. The company’s excess reserves increased to an all-time high of $2.44 billion, up $1.48 billion from the previous quarter.
Tether believes that the information provided in the report is a sign of increased trust in the stablecoin’s ability to maintain its one is to one peg to the US dollar.
The Flight to Safe Cryptocurrencies
Conor Ryder, an analyst at Kaiko, suggests in an interview with the source that Tether’s premium is an indication of growing trust in its peg and the perception that it is secure from the US Securities and Exchange Commission (SEC). This trust in Tether has contributed to the shift of investors towards the top-performing cryptocurrencies such as Bitcoin and Ether.
Meanwhile, Anders Kvamme Jensen, the founder of the AKJ global brokerage and digital asset specialist, believes that the current banking crisis is driving “hyper-bitcoinisation,” which refers to the eventual outcome of the US dollar becoming worthless. The analyst argues that purchasing Tether and Bitcoin represents a vote against the US system, making it less US-dependent and, therefore, reduces regulatory exposure.
The Paradox of Tether’s Trustworthiness
Tether’s status as the market’s most trusted stablecoin is notable, considering the doubts that have long hounded its peg to the US dollar. Despite these concerns, it has established itself as a safe haven with its reliable $1 peg.
This is in contrast to Bitcoin, which is often considered a safe haven asset due to its “outside” status as a form of currency free from the banking system. While Bitcoin offers protection from monetary debasement, Tether’s primary value lies in its ability to provide a secure peg to the US dollar. Ryder believes that this is one of the chief reasons behind Tether’s continued success.
Final Thoughts
Summing it up, Tether is the current safe bet in the volatile cryptocurrency market, with its peg to the US dollar providing investors with a sense of security amidst the ongoing regulatory crackdown. As investors continue to seek out safe-haven assets amidst economic and political uncertainty, Tether’s popularity is set to grow more.
Giancarlo is an economist and researcher by profession. Prior to his addition to Blockzeit’s dynamic team, he was handling several crypto projects for both the government and private sectors as a Project Manager for a consultancy firm.