Good morning, Asia. Here’s what’s happening in the market:
Welcome to Asia Morning Briefing, your daily digest of the top news from the U.S. and an overview of market moves and analysis. For a detailed overview of the US market, see CoinDesk’s Americas Crypto Diary.
Tether is back in the spotlight as traders revisit a familiar question: Is the world’s largest stablecoin as sound as its balance sheet suggests?
This is not a new debate. Tether truth proponents, who often have anti-crypto leanings, will concoct conspiracy theories about the health of USDT and how it can be used to pump up crypto markets. They will say that with Tether on the verge of collapse, Bitcoin is about to hit zero.
However, the debate has been reignited once again, now more seriously, by actual market participants rather than hyperbolic critics.
The disagreement highlights real differences in how to assess Tether’s strength.
BitMEX founder Arthur Hayes believes Tether’s growing investments in Bitcoin and gold would make it vulnerable if those assets fall, eroding its reported equity buffer.
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However, former Citi cryptocurrency research director Joseph Ayoub countered that Hayes’ research was incomplete because Tether’s disclosed reserves did not reflect its full corporate balance sheet.
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Ayoub believes that in the bigger picture, Tether’s holdings of equity, mining operations, corporate reserves and one of the world’s largest cash-generating Treasury portfolios give it a strong ability to absorb losses.
Perhaps the more acute concern is not solvency but immediacy.
Tether holds very little cash and relies on a limited banking system, raising potential questions about how quickly its largely non-cash reserves could be mobilized in an extreme redemption scenario.
Most of Tether’s reserves are in short-term Treasury bills, reverse repos, money market funds, gold, and Bitcoin. These are valuable assets, but they are not cash and cannot all be converted at the same rate, especially if multiple markets are under stress at the same time.
All is well as long as redemptions remain modest, which has historically been the case with USDT as most users recycle it on cryptocurrency exchanges rather than convert it back to fiat currency.
The open question is what happens if this pattern is broken. A major shock to Asian trading hubs or regulatory events affecting offshore markets could trigger a surge in redemptions, testing Tether’s ability to liquidate positions and move dollars through banking partners.
One of USDT’s record-breaking stress tests was in 2022, when it processed more than $2 billion in redemptions in a single day, while continuing to meet verified customer requests as per standards.
Tether emphasized that it has never failed to meet redemption requests from eligible users, even during periods of severe volatility, proving that its asset base can be quickly mobilized when needed.
This incident shows that Tether can handle meaningful outflows, but it does not address the question of how the system will perform during a longer, more chaotic redemption cycle.
Tether, for its part, dismissed any criticism, saying negative assessments of its balance sheet missed the bigger picture.
This year’s debate works because it rises above the familiar noise. These arguments come from traders, analysts, and builders who rely on USDT every day and evaluate its strengths and weaknesses with a clear eye.
There was no talk of hidden conspiracies or imminent collapse, just mature discussions about balance sheets, liquidity and market pipelines. As USDT becomes increasingly important in Asian trade flows, this may be just the scrutiny the market needs.
market trend
Bitcoin: As the Bank of Japan’s interest rate hike signal put pressure on risk assets, Bitcoin once fell to $84,000 during the U.S. session and is currently trading at about $86,436.
Ethereum: Ethereum is currently hovering near $2,794 and remains under continued selling pressure as Treasury-related ETH fell more than 10% amid a sell-off in crypto stocks on Monday.
Gold: Gold prices opened at $4,218.50 and briefly approached $4,300, rising as investors scaled back risks as cryptocurrency and stock futures fell, while markets priced in an 87.6% chance of the Federal Reserve cutting interest rates next week.
Nikkei 225 Index: Japan’s Nikkei 225 rose 0.54%, led by gains in financials, energy and basic materials stocks, with industrial companies such as Fanuc and NGK Insulators rising even as Japanese government bond yields hit multi-decade highs.
Elsewhere in Cryptocurrency
- Vitalik Buterin: Coin voting ‘black hands’ could erode Zcash privacy (Decrypted)
- JPMorgan and Strike CEO Jack Mallers remain silent, ‘debanking’ questions unanswered (CoinDesk)
- Trump Media and Crypto.com’s $6 Billion Cronos Treasury Will Be Revealed (Declassified)
