Crypto Industry Executives Agree Tether is Unlikely to be Replaced in the Stablecoin Market
Tether has seel a falling out t with most of the crypto community in the last few weeks due to many controversial revelations that have come to light following an investigation from the New York attorney general's office. For a long time, they had been suspected of not fully backing up their tokens with US Dollars as they claimed and also being a price manipulation tool, both of which they persistently denied. However, an investigation from the New York attorney general's office reveals that Tether had connived with Bitfinex to cover up hundreds of millions of dollars in losses by giving Bitfinex access to Tether’s reserves. On top of this, Tether, it was revealed, only backs up about 74 percent of their tokens with US dollars.
This revelation was the final straw and many crypto users seem to be of the opinion that Tether should be moved from the crypto public sphere and discarded. On paper, this would seem like a straight-forward idea but however, it has been revealed that replacing Tether with other stablecoins will not be quite as straight-forward because Tether, while revealed to be dishonest, is still the most dominant stablecoin on the market.
This comes following a consensus reached by to crypto trading executives who are B2C2 Founder Max Boonen and DV Chain CFO Paul Bialobrzewski.
The executives pointed out that the price trend of the Tether token is a rather odd one as it dropped 2 percent after the news broke of the attorney general's investigation but then surged back to above $1 this week and then we saw another slump on May 2, 2019.
Still Holding Ground
This brief slump is likely due to some institutional investors rallying briefly against Tether and taking some of their funds away. However, it did not last because many of the big institutional investors are not willing to fully remove support from Tether because it is the most dominant in the market and no other stablecoin can reasonably compete with it as of now.
“There was demand [for tether lending] initially, that we saw, a significant demand for it. However, a lot of the institutional lenders, and us as well, are unwilling to lend it out, given that there was super high risk. And so there weren’t a lot of opportunities to short it. At least that we were seeing from our lending counterparties,”
The fact that only 74 percent of Tether tokens are backed up by US dollars should have implied that the stablecoin should be trading with a discount of 74 percent but instead, the price of Tether didn't break above 97 cents in the past week.
“Clearly the markets are indicating that [tethers price traded at a 74% discount] may not be the case,”
“What is interesting is, you look at a lot of the other stablecoins that are regulated. They are trading at a slight premium. So it’s clear that the market is indicating that this thing is still worth close to parity. But there’s obviously a little bit of premium on the more regulated coins as well.”
Even with all these irregularities, the executives have agreed that Tether is unlikely to be displaced in the market as they were one of the first stablecoin issuers and have been paired with many other tokens in the market and unfortunately a substitute does not seem likely in the near future.
“The other stable coins are not serious contenders at this stage,”
“I am not very confident that a substitute will emerge in the near future.”