Good morning, Asia. Here’s what’s making news in the markets:
Welcome to the Asia Morning Briefing, a daily overview of top stories in US hours and an overview of market movements and analysis. For a detailed overview of US markets, see CoinDesk’s Crypto Diary Americas.
Tether is back in the spotlight as traders return to a familiar question: is the world’s largest stablecoin as healthy as its balance sheet suggests?
This is not a new debate. Tether truthers, usually with an anti-crypto bent, would concoct conspiracy theories about the health of USDT and how it is being used to inflate the crypto market. Bitcoin, they would say, is going to zero as Tether is on the verge of collapse.
However, the debate has resumed and is now more serious as it comes from actual market participants rather than hyperbolic critics.
The disagreement highlights a real divide over how to assess Tether’s strength.
Arthur Hayes, the founder of BitMEX, argues that Tether’s growing exposure to bitcoin and gold makes it vulnerable if those assets fall, eroding its reported equity cushion.
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However, former Citi crypto research head Joseph Ayoub pushed back, saying Hayes is working from an incomplete picture because Tether’s disclosed reserves do not reflect its full corporate balance sheet.
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Looking at the big picture, Ayoub argued that Tether possesses equity, mining, corporate reserves and one of the largest cash-flow-generating financial portfolios in the world, giving it a meaningful capacity to absorb losses.
Perhaps the more pointed concern is not solvency but immediacy.
Tether has very little cash and relies on limited banking connections, raising potential questions about how quickly its largely non-cash reserves could be mobilized in an extreme redemption scenario.
Most of Tether’s reserves sit in short-term government bonds, reverse repos, money market funds, gold and bitcoin. 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, which has historically been the case with USDT, as most users recycle it within crypto trading venues instead of converting it back to fiat.
The open question is what happens if that pattern breaks. 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 liquidate positions and move dollars through its banking partners.
One of USDT’s record-breaking stress tests was in 2022, when it processed more than two billion dollars in redemptions in a single day while continuing to honor requests from verified customers at par.
Tether highlighted that even during periods of severe volatility, it has never failed to accommodate redemptions from eligible users, presenting this as proof that its asset base can be mobilized quickly when needed.
That episode shows that Tether can handle meaningful outflows, but it doesn’t determine how the system would perform in a longer, more chaotic redemption cycle.
Tether, for its part, rejects any criticism, saying negative assessments of its balance sheet miss the big picture.
What makes this year’s debate useful is that it moves beyond the familiar noise. The arguments come from traders, analysts and builders who rely on USDT every day and assess its strengths and weaknesses with clear eyes.
There are no hidden conspiracies or impending collapse, just a grown-up discussion about balance sheets, liquidity and market plumbing. As USDT becomes more central to Asia’s trade flows, perhaps this is just the kind of scrutiny the market needs.
Market movement
BTC: Bitcoin is trading around $86,436 after briefly dipping towards $84,000 during the US session as interest rate hike signals from the Bank of Japan pressured risk assets.
ETH: Ether is hovering near $2,794 and remains under sustained selling pressure as state-linked ETH tenders fell more than 10% in Monday’s crypto-stock sell-off.
Gold: Gold opened at $4,218.50, briefly neared $4,300 and rose as investors discounted the risk of falling crypto 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 economics, energy and basic materials led gains, and industrial names such as Fanuc and NGK Insulators rose despite JGB dividends hitting multi-decade highs.
Elsewhere in Crypto
- Vitalik Buterin: ‘Dark Hand’ of Token Voting Could Erode Zcash Privacy (Decrypt)
- JPMorgan and Strikes CEO Jack Mallers Go Silent, Leave ‘Debanking’ Questions Unanswered (CoinDesk)
- Trump Media and Crypto.com’s $6 Billion Cronos Treasury Inches Closer to Public Debut (Decrypt)
