Cryptocurrency investors and traders have cashed out $7.7 billion from the stablecoin Tether () resulting in its market capitalization falling by 7.8% over the past seven days to $76 billion.
The amount withdrawn from the top stablecoin is nearly double the $4.1 billion it held in cash reserves at the end of 2021 according to Tether’s latest reservesfrom December 2021.
To maintain Tether’s peg with the US dollar the company behind the token backs USDT with assets such as cash, bonds, and Treasury bills, the purpose being that each token is backed by at least $1 worth of assets.
According to the latest reserves report, the company had a total assets amount of at least $78.6 billion, around $4 billion or 5% of which was cash.
However, the firm seems to be able to maintain its cash reserves despite the “bank run” scenario caused by theTerraUSD (UST) which had investors fleeing not only stablecoins but for fear of collapse.
A separate transparencyupdated daily shows that 6.36% of Tether’s assets are currently held in cash which would amount to roughly $4.8 billion if Tether’s reserves closely match the USDT market cap.
On May 12, market panic causedon major exchanges, causing Tether to issue a statement at the time stating that it will honor all redemptions to $1.
The same day, Tether’s Chief Technology Officer Paolo Ardoino said in a Twitter spacesthat the majority of the company’s reserves are in U.S. Treasuries and that over the last six months it has .
Tether hasregarding the assets in its reserve and only published in May 2021. The published reports are still vague as to the exact assets the company invests in.
This obscurity coupled with the recent short-lived de-pegging had some investors rushing to swap their Tether for another popular US dollar stablecoin, USD Coin (USDC) on the notion that USDC was audited and already fully backed by cash and U.S. Treasuries.
A blogon May 13 by Circle’s Chief Financial Officer Jeremy Fox-Geen made in response to the stablecoin fallout reaffirmed that USD Coin was fully backed by cash and U.S. Treasuries for the 50.6 billion USDC in circulation.
Data fromfurther shows investors finding a safe harbor in USDC, a 6.3% leap in the USDC market cap took place between May 3 and May 17 representing $3.1 billion of inflows over that time.