Remember, Tether is now backed by "assets" that they claim have market value of 1:1. No one knows what those assets are or if they are correctly valued.

Tether lately claims USDt is backed by fiat and various other assets. They also claim 1:1 backing. Generally, "reserves" should be in cash or cash equivalents of high liquidity (treasuries, etc), or assets marked to market. If they aren't in such form, there is no way to know if they are fairly valued on Tether balance sheet.Tether is owned by the same people as Bitfinex, thus there is no incentive to fairly value the debt. It's entirely possible that Bitfinex has no intention of repaying Tether, but Tether claims they will simply so they can say it's 1:1. Again, same owners, so they don't care. It's irrelevant to them.We already know Tether has backed $850M of USDt with an $850M loan to Bitfinex. That note likely does not have face value or a premium, thus that note alone means Tether is under-reserved. If the debt had face value, Tether likely would have tried to sell it and immediately recoup reserves. In reality, it's probably very risky debt that shouldn't have face value. Tether became Bitfinex's lender of last resort because they couldn't sell debt to anyone else.So that brings me back to the topic of the post. Tether assets are clearly no longer cash and may even include debt that has far less value than they claim. USDt could be backed by pure junk that Tether has just decided to mark as high quality rather than anything close to fair value. For all we know, Tether is owed $1B by the owners personally and they have no intention of paying it back, ever.This is why you'll never get an audit. It's likely way under-reserved with junk nowadays. Remember when MBS in 2008/2009 were backed by junk that was incorrectly rated/valued? Tether is the one who gets to rate/value their own junk.

Submitted April 29, 2019 at 06:42AM