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Analyst: Tether Is Backed By 75% Only Due To Problems With Bitfinex

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Cryptocurrency researcher Alex Kruger analyzed the situation around the Bitfinex exchange and its related companies, and came to the conclusion that the stablecoin Tether (USDT) is backed by currency reserves 75% only.

Based on the information provided in official documents, Kruger in a series of tweets describes briefly the sequence of events around a well-known trading platform. The first thing he notes is that Bitfinex really had a “hole” of $ 850 million, formed at the end of last year.

The funds has stucked in third-party processing Crypto Capital. Representatives of the latter claim that they were confiscated by the authorities of several countries. After this statement, Bitfinex management suspected payment processing of fraud.

Kruger stresses that until November 2018, the USDT coins were fully backed by a fiat dollar. However, between November 2018 and March 2019, Tether, transferred to the trading platform $ 625 million.

According to CoinDesk, this was done to solve problems with Bitfinex liquidity, not related to Tether. Since then, the USDT has ceased to be fully backed by the fiat dollar.

Note that the transfer to $ 625 million made in early March of this year, since around this time Tether updated the USDT tokens security policy. Each coin was provided with "reserves, which include the traditional currency and cash equivalents, as well as, from time to time ... other assets and forthcoming proceeds from loans that Tether provided to third parties."

Then, Kruger continues, in March 2019, Bitfinex decided to “patch a hole” in the balance with the help of a credit line from Tether in the amount of $ 900 million with a three-year maturity and interest rate of 6.5%.

The credit line was secured by 60,000,000 shares of iFinex Inc. owned by DigFinex. This deal was closed on March 19th. To date, the total loan amount is $ 700 million.

As a result, the analyst concluded that Tether's stablecoins are currently backed up by 75% with cash and their equivalents, and by 25% with a loan secured by iFinex shares.

According to Kruger, this option of partial reservation is fraught with significant credit risks.

Opinions Of Other Experts On The Situation With Bitfinex And Tether

Many analysts are convinced that problems with Bitfinex may adversely affect the market. So, according to Bitwise, this marketplace is currently in second place in terms of BTC spot trading.

The possible closure of Bitfinex can lead not only to a shortage of liquidity in the market, but also provoke a significant tightening of industry regulation.

Analyst @jpthor__ agrees with Kruger’s conclusion that initially Tether was fully secured, but after problems with Bitfinex, it was backed up by only 75%.

According to him, if the prosecutor's office in New York is busy with companies, then Bitfinex may cease to exist, but Tether will survive.

In general, @jpthor__ is sure, this situation opens up good opportunities for buying Bitcoin. In addition, in the long term, the situation with Bitfinex and Tether will have a positive impact on the development of the industry, since “another skeleton is pulled out of the closet”.

The user of NebraskanGooner is not so optimistic and believes that this situation will scare institutional investors.

An independent crypto researcher Hasu has come to the conclusion that if Tether is provided with 75% of reserves, then Bitfinex can hardly boast such a margin of financial viability.

 

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