Coppola Comment

Tether has issued what it calls a “ breakdown of its reserves ”. It actually consists of two pie charts. Here they are: Seriously, this is all Tether has seen fit to reveal.  Furthermore, the pie charts only purport to show the breakdown of Tether’s reserves on the 31st March 2021. We do not know whether Tether’s reserves still have the same composition now.  Nonetheless, the crypto world took these charts as an indication that Tether was, if not fully cash-backed, at least mostly. “76% of its reserves are in cash or cash equivalents, whereas banks only have 10%!”, crowed several people. In both the reserve report and the monthly attestation , Tether takes “reserves” to mean total consolidated assets. The monthly attestations from Moore Cayman essentially say:  1. Tether’s total consolidated assets exceed its consolidated liabilities  2. Tether’s total consolidated liabilities exceed the quantity of tokens in issue  3. Therefore Tether’s reserves exceed the quan...

Tether is the issuer of the cryptocurrrency world's premier stablecoin, USDT. Stablecoins aim to guarantee the value of cryptocurrencies in dollar terms, hedging volatility risk and making it easier to realise notional gains from cryptocurrency's wild price rises. But Tether's relationship with the main cryptocurrencies, particularly Bitcoin, is controversial. There is a raging battle between those who think that USDT issuance pumps up the price of Bitcoin, and those who argue that USDT issuance has nothing to do with Bitcoin's price. But in my view, the truth is more complex. Tether's asymmetric mechanics both support and disprove the arguments of both sides.  USDT, Tether's "token", is a representation of the US dollar that can be readily traded on cryptocurrency markets. People exchange dollars for USDT, then use the USDT to buy and sell cryptocurrencies. They do so secure in the belief that each USDT token is always worth 1 US dollar. And so far, U...