pull down to refresh
1045 sats \ 3 replies \ @grayruby 1 Feb \ on: Is Tether the Best Business in the World? crypto
No, their profit is too exposed to treasury yields. But it is a good business to take dollars convert them into interest bearing treasuries and give back digital dollars in return. Also very smart that they are sweeping profits into bitcoin.
Tether is a welcome buyer of treasuries right now. When they become too large and pose a risk to the system the powers that be may not be so indifferent to them.
their profit is too exposed to treasury yields
I agree there is some risk with their profits being so concentrated today, just not sure how to quantify that risk
Tether is a welcome buyer of treasuries right now. When they become too large and pose a risk to the system the powers that be may not be so indifferent to them.
It’s a tricky balance to navigate though, if Tether becomes a really significant buyer of US debt, how do you stop them from buying debt without sending yields through the roof?
reply
The yield is all they care about, no? And not having a run on the reserves. Their liabilities are denominated in the same USD and USD-like treasuries as their assets, so as long as the redeem demand doesn't outstrip their yield rate and reserves, they're still making rather large profits.
Stablecoins in general are also a large source of demand for the US dollar and its treasures/interest products, so the US gov't has a cynical reason to just allow Tether and participate via USDC/Circle. Even if the competitors to Circle exist, they all still need to buy and hold the US dollar which is a contributor to the whole "Dollar Milkshake" theory from Brent Johnson
reply
It’s the UST, so probably one of the least risky asset to hold, ever.
A concentration of allocation does not mean riskier. I have seen a lot diversified portfolio ended up with more riskier positions.
reply