How the largest drop in the issue of Tether USD can lead to a crypto winter scenario of 2.0

The USDT token issued by Tether lost $ 9 billion in capitalization in one week. Investors are converting the so-called “stable” coin into fiat dollars amid the collapse of the UST, which led to the shutdown of the Terra blockchain and the depreciation of the service cryptocurrency.

Tether in 2015 was the first to invent and implement the idea of transferring USD to the blockchain, guaranteeing holders the opportunity to exchange 1 to 1 on its own platform.

Over time, the conversion of USDT was delegated to exchanges and market makers, and the popularity of the token led to an increase in its capitalization above $ 83 billion and the third place in the ranking of cryptocurrencies. The abnormal growth in the issue of stablecoin caused many accusations of manipulating the Bitcoin rate with the help of unsecured coins.
The release of hundreds of millions, and subsequently several billion USDT per day, often coincided with the subsequent rise of BTC quotes. Subsequently, this anomaly received a simple explanation.

Large USDT exchanges were conducted by institutional investors planning to purchase cryptocurrency when favorable forecasts appear. They did not always turn out to be correct, but the public noted only those moments of the jump in emission, coinciding with the growth of BTC. In reality, the capitalization of USDT grew almost constantly and it is much more important to track the moments when it abnormally fell.

In 2018, the US authorities caught Tether in the release of an unsecured issue of tokens. The company, through the fault of one of the banks in Panama – holders of fiat reserves, lost access to $ 850 million. Tether had to reduce tokens by this amount, buying them with money raised for the issue of UNUS SED LEO tokens.
This led to a drop in the issue of USDT by 30%, dropping the BTC rate by 50%, which then had already suffered large price losses during the crypto winter.

Now a similar situation has arisen in the market, despite the differences in 2018. Tether is now conducting a security audit, as ordered by a U.S. court. However, the company abandoned the model of providing 100% of fiat emission.

According to the latest data of the report, Tether ran out of currency and $ 3 billion of the 9 billion sold USDT had to be provided by selling securities. If the outflow continues, it will be difficult for the company to quickly sell bonds, some of which are short-term commercial bonds. Brokers can lower the price on them, knowing about the forced sales of Tether.

The company understands these risks and has filed a petition with the U.S. Supreme Court to overturn a New York court order to disclose reserves. One of Tether’s arguments was the actions of insiders, who will use information about the composition of the bond portfolio.

The US Supreme Court rejected the petition, which could lead to an even greater reduction in the issue of USDT, which in turn will lead to a repetition of the situation. Which arose at the end of 2018. In this case, BTC is able to reach the levels of $ 10,000-12,000.