Five days since losing its US dollar peg, fiat-backed cryptocurrency tether (USDT) continues to trade at a discount to its supposed $1.00 valuation.
Defenders have largely chalked up the markdown to FUD, arguing that supporters of other “stablecoins” are launching a coordinated assault on tether, which has long dominated this market niche. However, billionaire investor and cryptocurrency bull Mike Novogratz says that USDT’s woes are the fault of its issuer’s lack of transparency.
USDT/USD | Octopuses | Source: TradingView
“I think Tether didn’t do a great job in terms of creating transparency,” said Novogratz on Wednesday at a conference in Frankfurt, according to a Bloomberg report. The former Fortress principal specifically called out Tether Limited, the token’s creator, for operating offshore and remaining cagey about its financial relationships, including with whom it is banking.
As CCN.com reported, Tether is said to be currently banking at the Nassau-based Deltec Bank, where it opened an account after severing ties with the now-floundering Puerto Rican institution Noble Bank. Neither of these relationships has been confirmed publicly.
Concerned about the firm’s opacity, Novogratz said that he prefers some of the newer stablecoin options, particularly the Gemini Dollar (GUSD), which is issued by the cryptocurrency exchange founded by Cameron and Tyler Winklevoss. Unlike Tether, Gemini’s assets are housed in a US correspondent bank, the Boston-based State Street. The stablecoin issuer, which received approval from the New York Department of Financial Services (NYFDS) to release the token, has also contracted with accounting firm BPM LLP to evaluate Gemini’s monthly attestation reports detailing that the token is always fully-backed by USD.
Tether’s outstanding supply has shrunk by nearly $700 million in October. | Source: CoinMarketCap
“The concept of stablecoins make sense,” Novogratz said, explaining that they are ideal for transactional exchanges, unlike bitcoin, which he has referred to as “digital gold.”
However, competition within the stablecoin market is growing increasingly stiff. GUSD, along with “regulated” stablecoins Paxos Standard (PAX), TrueUSD (TUSD), and USD Coin (USDC), has been listed on a number of major exchanges in recent weeks. All of these tokens have consistently traded at a premium to tether, suggesting that, at least right now, the market trusts them more than USDT. Moreover, two of them — GUSD and USDC — have been added as settlement options on BitPay, which processed more than $1 billion worth of cryptocurrency payments last year.
In follow-up comments posted on Twitter, Novogratz stressed that he believed USDT is fully-backed by physical dollars and did not want to sow rumors about the token.
“I’d like to put context to these quotes as the last thing I want to do is spread FUD. I said I thought tether has a dollar for every tether and that we actively traded it. The fact that almost $700mm has been redeemed in an orderly fashion is important.”
Nevertheless, he said that Tether must work harder to earn back lost trust and prove that its token should trade at its full $1.00 valuation.
Featured Image from BIG Crypto/Ethereal Summit/YouTube
Last modified: March 4, 2021 3:50 PM