Good morning Asia. This is what is making news in the markets:
Welcome to Asia Morning Briefing, a daily summary of top news during US time and an overview of market movements and analysis. For a detailed overview of the US markets, see CoinDesk’s Crypto Daybook Americas.
Tether is back in the spotlight as traders once again ask a familiar question: is the world’s largest stablecoin as strong as its balance sheet suggests?
This is not a new debate. Tether truthers, usually with an anti-crypto bent, concocted conspiracy theories about the health of USDT and how it is being used to inflate the crypto market. Bitcoin, they would say, is about to hit zero while Tether is on the brink of collapse.
However, the debate has been reignited once again and is now more serious, coming from real market participants and not hyperbolic critics.
The disagreement highlights a genuine division over how to assess Tether’s strength.
BitMEX founder Arthur Hayes argues that Tether’s growing exposure to bitcoin and gold leaves it vulnerable if those assets decline, eroding its reported capital cushion.
Charging…
However, former Citi cryptocurrency research leader Joseph Ayoub responded, saying Hayes is working from an incomplete picture because Tether’s disclosed reserves do not reflect its full corporate balance sheet.
Charging…
Looking at the bigger picture, Ayoub argued, Tether owns stocks, mining operations, corporate reserves and one of the largest cash-generating Treasury bond portfolios in the world, giving it significant ability to absorb losses.
Perhaps the most pressing concern is not solvency but immediacy.
Tether has very little cash and relies on limited banking avenues, raising potential questions about how quickly its largely non-cash reserves could be mobilized in an extreme bailout scenario.
The majority of Tether’s reserves are in short-term Treasuries, reverse repos, money market funds, gold, and bitcoins. 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.
Everything works smoothly as long as redemptions remain modest, as has historically been the case with USDT, as most users recycle it at cryptocurrency trading venues rather than converting it back to fiat currency.
The open question is what will happen if that pattern is broken. A major shock in Asia’s trading hubs or a regulatory event affecting offshore markets could trigger a surge in redemptions that tests Tether’s ability to unwind positions and move dollars through its banking partners.
One of USDT’s unprecedented stress tests came in 2022, when it processed more than $2 billion in redemptions in a single day while still fulfilling requests from verified customers at par.
Tether highlighted that even during periods of severe volatility, it has never failed to honor refunds from eligible users, presenting this as evidence that its asset base can be quickly mobilized when needed.
That episode shows that Tether can handle significant outflows, but it does not determine how the system would behave in a longer, more chaotic redemption cycle.
Tether, for its part, is dismissive of any criticism and says that negative assessments of its balance sheet do not capture the bigger picture.
What makes this year’s debate useful is that it goes beyond the familiar noise. The arguments come from traders, analysts and builders who rely on USDT every day and evaluate its strengths and weaknesses with clear eyes.
There is no talk of hidden conspiracies or imminent collapse, just an adult discussion about balance sheets, liquidity and market sounding. As USDT becomes more central to Asia’s trade flows, this is perhaps exactly the type of scrutiny the market needs.
Market movement
BTC: Bitcoin is trading around $86,436 after briefly sinking towards $84,000 during the US session as the Bank of Japan’s rate hike signals pressured risk assets.
ETH: Ether hovers around $2,794 and remains under sustained selling pressure as treasury-linked ETH bets fell more than 10% in Monday’s selloff in cryptocurrency stocks.
Gold: Gold opened at $4,218.50, briefly approached $4,300 and rose as investors de-risked falling cryptocurrency and stock futures, while markets priced in an 87.6% chance of a Fed rate cut next week.
Nikkei 225: Japan’s Nikkei 225 rose 0.54% as the financials, energy and basic materials sectors led gains and industrial names such as Fanuc and NGK Insulators rose even as JGB yields hit multi-decade highs.
Elsewhere in Crypto
- Vitalik Buterin: The ‘dark hand’ of token voting could erode Zcash (Decrypt) privacy
- JPMorgan and Strike CEO Jack Mallers remain silent, leaving ‘debanking’ questions unanswered (CoinDesk)
- Trump Media and Crypto.com’s $6 Billion Cronos Treasury Inches Closer to Public Debut (Decrypt)
