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Tether
Consolidates reserve report
Evergrande default could expose Tether. For those who don’t know Tether. It is the company behind the USDT stable coin which you would find an explicit explanation on intCount previous article.
With that being said, the reserve held by this company to mint the USDT for crypto traders happens to be 50% in sort of commercial papers and certificate of deposit which is roughly $30 billion worth according to the breakdown of their reserve report published this year. The question here is, What if these papers and certificates belong to Evergrande!!
Why Tether has so much commercial paper!
There are two answers to this question, the first one would be that Tether would like to earn interest on these commercial papers and the second would be that there are very few banks that would be willing to hold $30 billion in cash for Tether.
Does Tether holds any Evergrande commercial paper
When it comes to the ocean of commercial paper, no one knows. As these assets are not standardized like bonds. If it would be the case, the implications are immense. Because on a fist hand. It would mean that the reserves are not fully backed, and all that commercial paper would be worth a lot less.
Why Tether matter to financial market
Tether remains the major component for bitcoin liquidity. On many exchanges platform, USDT which is the coin issued by Tether, is the main pair to buy other crytpo. USDT by far, remains the highest coin by trading volume with a $56 billion per day. So, quite simply if there is a crisis confidence in Tether, this volume will dry up.
C/c
The goal of this article was to create awareness, rather than nothing else. The default of Evergrande still not immediately clear. It all will depends on wether the Chinese government will come to its aid or not.
