Tether’s dollar-pegged stablecoin hits $100bn

London — The number of dollar-pegged stablecoins issued by Tether has crossed $100bn, as the price of bitcoin surged on Tuesday towards a record high amid broader cryptocurrency demand.

Tether issues a stablecoin that is designed to maintain a constant value of $1. It is widely used as a way of moving money in cryptocurrency without being exposed to price swings in other cryptocurrencies such as bitcoin and ether.

At just more than $100bn in circulation, tether is the third-biggest cryptocurrency, with about $27bn worth of the tokens having been issued in the past year, according to market tracker CoinGecko. About $122.5bn of the token has changed hands in the past 24 hours, CoinGecko data shows.

The token’s milestone, which Tether posted on its website late on Monday, comes as a surging bitcoin was just 5% off a record high. Bitcoin’s price has surged 57% so far in 2024 and at $66,600 is not far from hitting a record high of $70,000.

Tether, which is widely used as a way to purchase cryptocurrencies on exchanges, says it maintains its dollar peg by holding dollar-based reserves that match the volume of cryptocurrencies it has created.

“Traders were willing to pay a premium on tether to get their orders through,” said Justin D’Anethan, head of Asia-Pacific business development at digital assets market maker Keyrock.

“Ironically, tether has always been FUDed [plagued by anxiety about their legitimacy] as they resisted disclosing their reserves and balance sheet for years,” D’Anethan said.

“Nonetheless, they’ve been around and stood the test of many volatility events, from 2017 up to now,” D’Anethan added, noting that a majority of cryptocurrency pairs are denominated in tether’s stablecoin, which explains the demand for it when investors are bullish about cryptocurrencies.

US regulators have warned banks that stablecoin reserves could be subject to rapid outflows, for example if holders rushed to exchange such tokens back into traditional currency.

Tether agreed to provide quarterly reports on its reserves for two years, as part of a 2021 settlement with the New York attorney-general’s office.

At the end of 2023, Tether’s reserves held $63bn of US treasuries, as well as $3.5bn of precious metals, $2.8bn of bitcoin, $3.8bn of “other investments” and $4.8bn of “secured loans”, its latest report reads.

Reuters