Could stablecoin Tether (USDT) collapse? And how? - Crypto in Plain English - Episode 191 - by cryptohunt.it - Transcripts

June 21, 2022

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Could stablecoin Tether (USDT) collapse? And how?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Could Tether, the most popular so-called stablecoin, collapse? It's possible! Let's see how this would go down.

In order for Tether to "de-peg", meaning to drop significantly below the stabilized price of $1, two things would need to happen.

First, a run on the "bank": If enough people lose trust in USDT and want to exchange it back to US Dollars, Tether, the company behind it, would have to sell their significant reserves to make that happen.

Now, if people still don't trust that Tether has enough money to convert it all back to real, hard Dollars, step 2 kicks in: They will dump USDT on the open market for a discount, hoping to avoid the worst.

So, here's the big question: Why would people think Tether can't pay? Don't they claim to be over-collateralized, meaning they have more in the reserve than there are USDTs out there?

Allegedly, but nobody really knows the details. In fact, they have been sued by the US government for shady reporting multiple times. You'll have to assume that many of their assets are volatile in value – such as stocks and crypto. And with the recent wider market crash, Tether reserves might reach a tipping point.

So, will Tether collapse? Your guess is as good as ours. It might take another black swan event to make it trip, but there have been a few of those lately.

Regardless of where you stand on that: always think about the risk/reward of owning something that will never go over $1, but could lose peg and fall way below.

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Transcript

welcome to the crypto Anjem where we spent one minute a day to explain crypto in plain english could tether the most popular so called stable coin collapse. It is possible. Let's see how this would go down In order for tether to deepak meaning to drop significantly below the stabilized price of $1.2 things would need to

happen first A run on the bank. If enough people lose trust in U. S. D. T. And want to exchange it back to

us dollars, Tether the company behind it would have to sell their significant reserves

to make that happen. Now if people still

don't trust that tether has enough money to convert it all back to real

hard dollars. Step two kicks in. They will dump us D. T. On the open market for a discount, hoping to avoid the worst. So here's the big question.

Why would people think tether can't pay? Don't they claim to be the over collateralized meaning they have more in the reserve than there are U. S. D. T. S out there

allegedly. But nobody really knows the details.

In fact they have been sued by the U. S. Government for shady reporting multiple times. You have to assume that many of their assets

are volatile in value such as stocks and crypto. And with the recent wider market crush

tether

reserves might reach a tipping point. So

tether collapse. Your guess is

as good as ours,

it might take another black swan event to

make a trip. But there have been few of those lately regardless of where you stand on that. I always think about the risk reward of owning something that will never go over $1 but could lose,

pack and fall way below.

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