24 May 2022

Tether dominance is declining

Tether has seen $10bn worth of redemptions following the UST collapse, while USDC and BUSD see growth.
In light of last week’s Tether de-peg, Tether has seen redemptions equivalent to $10 billion. The massive redemptions follow a large arbitrage opportunity appearing as Tether’s peg was challenged, creating fruitful grounds for market participants with Tether redemption capacities. The number of Tether’s in circulation is down 6.51% YTD, and also PAXOS’s USDP has seen a decline in its circulating supply YTD.
Meanwhile, USDC and BUSD experiences growth
USDC and BUSD, on the other hand, have seen a sharp growth in May. USDC’s circulating supply is up 26% YTD, while BUSD is up 28% YTD. These stablecoins saw smaller peg deviations during the chaotic markets following UST’s collapse.USDC is currently backed by 23% cash reserves and 77% short-duration US Treasuries. BUSD is issued by Paxos in partnership with Binance. While the composition are not clear, both USDP and BUSD is audited monthly and 100% backed by cash and short-term US treasuries.
What about Tether's backing?
Tether’s reserves include more types of money-market instruments. 47.5% of Tether’s reserves are in US Treasuries, while approximately 5% of the reserves are in cash and bank deposits. Tether first disclosed the composition of its reserves in March 2021. Back then, 2.23% of its reserves were held in US Treasuries, while 2.93% were held in cash. Tether thus has more exotic instruments backing it. Nevertheless, the last weeks have shown that Tether has the capacity to maintain huge redemptions, while Tether’s trend over the last year has been towards a backing more concentrated in US treasuries and cash deposits.
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