What happens if the USDT collapses? Will the whole market go back to the Ice Age?

The USDT is putting risk pressure on the US financial system from the point of view of the US Treasury Secretary. “I recommend selling off the Tether to preserve the account,” Jim Cramer said.

The USDT is on the eve of its biggest crisis since its launch. USDT is “denounced” as a fraud when Tether Holdings does not have enough assets to maintain the 1:1 exchange rate between USD and Tether (USDT).

Janet Yellen – the US Treasury Secretary – recently held an important meeting with the President of the Fed, the head of the Securities and Exchange Commission (SEC), and six other senior officials on the Tether cryptocurrency (USDT).

With inflation continuing to rise, the COVID-19 outbreak slowed the economy’s recovery, and the growing USDT cryptocurrency put the US financial system at risk.

The main problem is that if investors demand withdrawals in bulk, the company may have to sell all its assets to pay, while its assets are not available in the amount of 69 billion USDT that has been released to the market.

“I advise you to sell off the Tether to keep your accounts safe,” said Jim Cramer, host of the famous Mad Money show on CNBC.

“I know crypto investment lovers never want to hear my selling advice. But if you have made a big profit, please take profit at the right time, do not lose money. We need to wait for China’s next move on the Evergrande real estate company issue,” Jim Cramer said.

Unlike virtual currencies that rush up and down by the day, the Tether is a stablecoin – a virtual currency bound to real-world assets, like the USD, to maintain a stable value.

The Tether is designed to anchor the tie to the USD. Tether prices usually fluctuate around the $1 threshold. At the same time, Bitcoin has a historical peak spike of 69,000 USD/BTC.

Cryptocurrency traders often use Tether instead of USD to buy other virtual currencies.

Tether is the third-largest cryptocurrency by market value, behind only Ether and Bitcoin.

Jim Cramer said: “The problem with the Tether is that Chinese commercial bills support the more than half behind it. Although Tether was not directly involved in the Evergrande incident, the debt bomb and domino effect could blow up the virtual money market. Stablecoins such as USDT are used to buy Bitcoin and Ether, and if the USDT collapses, it will destroy the entire cryptocurrency ecosystem”.

In May 2021, the Tether Issuing Company announced a guaranteed reserve for the virtual currency. Accordingly, only 2.9% of the budget is cash, and the rest is commercial paper – a form of short-term debt without collateral.

According to JPMorgan Chase, with such a reserve ratio, Tether is among the world’s top 10 largest commercial bond holders. Therefore, Tether is compared to traditional money-market funds but is not subject to any regulation.

More worryingly, Letitia James – an American official – said: “Currently, Tether Holding Ltd. is run by unlicensed individuals and organizations, and all Tether operations are unregulated.”

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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