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?
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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
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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.
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