In an already uncertain bear market period, major ecosystem companies have their work cut out for them to reassure their audience. Such is the case with Tether, the issuer of the stablecoin USDT, which has sought to quell rumors about its exposure to Celsius. It claims that its recently liquidated Bitcoin loan has no impact on its reserves.
Tether liquidates a loan at Celsius
Yesterday, Friday, July 8, Tether issued a statement to put to rest the latest rumors claiming that its reserves used to underwrite its stablecoin USDT were impacted by the recent setbacks at cryptocurrency lender Celsius.
The company claims to have suffered a loan liquidation at Celsius without impacting said reserves. Effectively, the loan, made in Bitcoin (BTC) would have been over-collateralized by up to 130%. In other words, Tether was able to repay the entire amount of funds involved without this being detrimental to him. Thus, we can read in the statement:
“This process was conducted in a way that minimized any impact on the markets as much as possible and, in fact, once the loan was covered, Tether returned the remaining portion to Celsius, in accordance with its agreement. Celsius’ position was liquidated with no loss to Tether.”
The loan, the amount of which was not revealed in Tether’s statement, is said to be $900 million according to our colleagues at Axios. In October 2021, Bloomberg was already talking about a loan worth $1 billion.
Tether is following in the footsteps of its previous statement dated June 15, 2022, in which the USDT issuer already stated that its investment in Celsius did not impact its reserves in any way:
“Tether currently has no exposure to Celsius, other than a small investment in the company made from Tether’s own funds.”
An uncertain time that requires redoubled efforts
The bear market is a doubly complicated time. On the one hand, some players in the crypto-currency ecosystem find themselves directly exposed financially to the point of sometimes seeing their activities jeopardized, as the recent cases of Celsius, Voyager or even Three Arrows Capital (3AC) can testify.
But on the other hand, the market is under constant stress, and this can sometimes result in significant FUD (fear, uncertainty and doubt) towards certain platforms or companies, forcing them to speak publicly on certain subjects in order to reassure their public. In other words, these organizations must redouble their efforts to keep their heads above water.
Tether is particularly concerned about this, since as a stablecoin issuer, the company must at all times be able to back its USDT at a 1:1 ratio with its own funds. If an issuer finds itself unable to back its stablecoin, the market goes into a tailspin, and this can sometimes end badly, as the recent collapse of Terra’s UST demonstrated, even though it was an algorithmic stablecoin.
Tether ends its statement with these words, directed at those it believes would try to add fuel to the fire:
“Critics who claim that Tether is inconsistent clearly have no understanding of how lending, borrowing and risk management work.”
