What Is Keeping USDT Pegged To The USD? Breaking Down Tether Reserves

USDT is one of the most popular stablecoins in the space and it's one of the most used pairs to trade cryptocurrencies. This stablecoin aims to be always pegged 1:1 to the USD. For it to be always worth the same as the USD, the company behind it has to have reserves that match the current supply of USDT circulating.

So what are the Tether reserves?

According to Tether and their independent audit, Tether holds 85,05% of their USDT supply in cash or cash equivalents, 0,13% in corporate bonds, 3,78% in precious metals, 1,94% in Bitcoin, 6,36% in secured loans and 2,73% in other investments.

The biggest part of this cake can be divided in several different things, cash and cash equivalents can mean many things so lets break it down. Inside the 85,05% of the cash and cash equivalents, 75,86% are U.S Treasury Bills, 12,09% are overnight reverse repurchase agreements, 0,78% are term reverse repurchase agreements, 11,06% are money market funds, 0,12% are cash and bank deposits and 0,09% are non-US Treasury Bills.

All these numbers mean that effectively, real cash is a really small percentage of Tether's holdings. The major holdings according to Tether are U.S Treasury Bills and there's more investments in the middle of this that are not known exactly what they are.

As we know, it only takes a small decline in the reserves to deppeg a stablecoin, supposedly reserves have to be atleast valued at the same as USDT supply. When this audit was made, in the 30th of June, Tether had 67 billion dollars in assets and 66 billion dollars in liabilities, meaning that the reserves had 1 billion dollars more in value than the supply.

Looking at the supply of USDT now, we will find that there are more than 83 billion USDT circulating, meaning that Tether would have to add almost 30 billion dollars to their reserves. Here is where the questions start, does Tether hold 83 billion in reserves right now? Does Tether always hold the same amount of reserves as they have in USDT supply or do they only hold it when an audit is comming.

This is the uncertain that keeps some users worried about Tether, if they don't always hold they reserves accordingly, it only takes something happening like a leak for USDT to come down in a spiral and crash the entire market.

USDT is an important part of the market, even if it's disliked so much. Tether should make more efforts to keep users assured that they are doing things right. Their reputation in the crypto ecosystem is bad and they are accused of all kind of things, one of them being market manipulation.

Will USDT ever be as transparent as they should and finally assure users that they are completely legit and not an house of cards waiting to fall?