Tether pushes out doubts about its stability, but is this enough for the market?

15.05.2023 10:42|Analyst Team, Conotoxia Ltd.

In a report by auditing firm BDO, published on 9 March, we find the results of a review of Tether Limited's accounts. In the opinions, BDO states that the accounts comply with international auditing standards, while noting the significant risks associated with holding Tether stablecoins. The report shows that Tether maintains adequate foreign exchange reserves to cover the value of all issued tokens. There are voices of scepticism about this opinion.

A few words of scepticism to start with

As FORTUNE's Jeff John Roberts points out, stablecoin Tether (USDT) appears to have a mysterious history of related business and accounting practices. Despite its capitalisation of $82 billion, Tether is considered an uncertain and troubled company. In an audit report issued by the company, it portrays its finances as in good shape, arguing that it has more assets than liabilities. However, due to the company's mysterious and suspicious history, the report raises many questions and concerns. Examples of questions Roberts asks:

  • Why did the company only issue an 'assurance report' (external commissioned report) instead of conducting a full audit?
  • Why is it using an unknown audit firm from Italy instead of a reputable consulting and auditing firm?
  • There are also questions about why the company is using gold (perhaps linked to its gold-based cryptocurrency) and bitcoin as its reserves, when its cryptocurrency was supposed to be backed only by US dollars.

Roberts points out that in the traditional financial world, such irregularities would raise suspicion among investors, who would start divesting their assets in favour of safer ones. But in cryptocurrencies, the rules are different and people seem to accept Tether's stability, regardless of suspicions about accounting.

However, BDO Italia, which carries out the report, seems more credible than, Roberts reports, as it is part of the international network of BDO firms based in Belgium. BDO is one of the world's largest networks of audit and consulting firms, with more than 100,000 employees in over 160 countries.

BDO Italia offers its services to clients in various private and public sectors of the economy, including energy and industry. The company says it provides a comprehensive approach to its clients' problems and its services are tailored to each company's individual needs.

What do we learn from the report?

A report published by auditing firm BDO concerns a review of Tether Limited's accounts related to the Tether stablecoin (USDT) issue. As of 1 March this year, Tether held $81.8 billion in assets and $79.3 billion in Tether cryptocurrency. The new certificate indicates that Tether's assets consist of, among other things, $53 billion in US Treasury bills, $7.5 billion in overnight loans backed by Treasury bills, $7.4 billion in money market funds, and only $481 million in cash and bank deposits. Tether also has $3.4 billion in gold and $1.5 billion in bitcoin. Tether has previously announced its intention to eliminate the amount of secured loans from its portfolio and reduce it to zero by 2023. Tether also claims to have recorded as much as $1.4 billion in net profit in the first quarter of this year, resulting in a surplus of $2.44 billion in net assets. Apart from this, there has been a noticeable decline in cash and bank deposits, from about $5.3 billion in the December certificate to just $481 million in March. According to THE BLOCK, Tether now accounts for as much as 45.7 per cent of the market share of major stablecoins. The reported gains appear to be due to the cryptocurrency's continued growth in capitalisation since July last year. Despite this, the total stablecoin capitalisation continually seems to be melting away month by month, thus reducing the monetary base for the cryptocurrency market as a whole, which seems to reduce the potential for growth for this market.

Source: https://www.theblock.co/data/decentralized-finance/stablecoins

Source: Conotoxia MT5, BTCUSD, Daily

 

Grzegorz Dróżdż, CAI, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.18% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Like the article?
Share it with friends!


See also:

May 12, 2023 9:18 am

Record heat in Southeast Asia. What impact could they have on markets?

May 10, 2023 10:11 am

Poland joins other countries, buyers of gold. Can bullion gain in value?

May 9, 2023 11:00 am

Investment legend Carl Icahn under pressure following publication of Hindenburg Research report, or how reputation obscured reality

May 8, 2023 3:37 pm

Apple launched a savings account - what inspired it, and what could be the next steps?

May 4, 2023 3:20 pm

Contraction in the stock market - is this a chance to catch a bargain?

Apr 28, 2023 12:31 pm

U.S. quarter-on-quarter GDP growth came out lower than expected. What does this mean for the Fed?

71.98% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.98% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trading on CFDs is provided by Conotoxia Ltd. (CySEC no.336/17), which has the right to use the Conotoxia trademark.