Tether has likely been insolvent for out of () days based on the assets reported in its attestation.
For more details, see the Methodology section below. View the Changelog for methodological changes made since release.
To make different assumptions about the relative mix of Tether's asset holdings, change the percentages below (representing each asset's portion of Tether's full portfolio) to view Tether's hypothetical portfolio performance over time:
Note: When the sum of the asset allocation is less than 100%, the remainder of the assets are presumed to be static -- neither increasing nor decreasing in value. See the Methodology section for more details.
Tether (USDT) is the world's largest cryptocurrency 'stablecoin,' with over $80 billion in reported assets. The purpose of stablecoins, which are purportedly backed 1-to-1 with a fiat currency like the U.S. dollar, is to increase liquidity in crypto trading, enable safer margin investing, and decrease settlement times in comparison to holding fiat currencies.
Tether's web site claims: "All Tether tokens are pegged at 1-to-1 with a matching fiat currency (e.g., 1 USD₮ = 1 USD) and are backed 100% by Tether’s reserves." However, despite years of promising to do so, it has never released an audit of its financials. It instead relies on attestations, a far lower standard of evaluation that simply states whether Tether has funds in its accounts exceeding its liabilities at one specific moment in time.
In February 2021, Tether (along with its sister company Bitfinex) was fined $18.5 million by the New York attorney general and banned from servicing New York-based customers, because 'Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines...Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.'
Then in October 2021, Tether was fined $41 million by the Commodities and Futures Trading Commission, which stated that 'Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.'
Both investigations found that Tether had deceptively transferred funds from Bitfinex into its own accounts in advance of attestations or verifications. As the CFTC settlement press release noted: 'Tether retained an accounting firm to perform a review of Tether reserves on a date Tether selected in advance, and Bitfinex transferred over $382 million to Tether’s bank account in advance of that review.'
Tether's own Terms of Service paint a very different picture of USDT's convertibility than its marketing materials do. Buried in its fine print is the statement: 'Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves.'
shareholder equity anomalies
Tether's asset allocation isn't the only unconventional aspect of its finances. Tether's reported shareholder equity (or 'shareholder capital cushion') - again, its assets minus its liabilities - is remarkably static over time, especially in comparison to the broader financial markets - except for dates on which it releases its quarterly reserves attestations. On those dates, Tether has reported significant, abrupt changes to its shareholder equity.
An initial, seemingly plausible interpretation: perhaps Tether only updates its shareholder equity data once per quarter, based on its most recent attestation report. However, this interpretation is not possible: shareholder equity is simply the difference between assets and liabilities, both of which Tether's Transparency page updates on a daily basis, and those figures often change significantly. This makes the near-static nature of Tether's shareholder equity figure between attestation release dates, in stark contrast to its sudden shifts on those same dates, entirely inexplicable.
Tether's asset self-reporting, especially in comparison to its stablecoin peers such as USDC and BUSD, has historically been extraordinarily light on details. (Note that this has improved somewhat as of the March 31, 2023 attestation, which broke out Tether's investments into more discrete categories.) Therefore, due to this opacity around the exact constitution of Tether's holdings, constructing a hypothetical portfolio necessarily entails making some assumptions and arbitrary decisions and is, therefore, subject to potential errors of judgement (not to mention of calculation). Disclaimer: These errors may be significant. If you see any, please do get in touch and I'll do my best to quickly update.
Here is how I have constructed this porfolio:
For U.S. Treasury bills, I'm assuming Tether invests in the iShares 0-3 Month Treasury Bond ETF (SGOV). This is a reasonable proxy, given that Tether's September 30, 2023 attestation states that they hold 'U.S. Treasury Bills with a residual average maturity of less than 90 days,' and (as of October 30, 2023) SGOV's weighted average maturity is 0.10 years. Note that Tether's most recent attestation states that its 'financial investments are valued at fair value in line with IFRS 9' and that 'other assets and other liabilities are valued at amortised cost (notional value for short-term assets and liabilities) less any expected credit losses.'
For money market funds and Commercial Paper and Certificates of Deposit, I am using the Vanguard Federal Money Market Fund (VMFXX), including monthly compounding dividends and assuming a static $1 NAV. Note that, since Tether's December 31, 2022 attestation, Tether has listed no assets under the Commercial Paper and Certificates of Deposit category.
For cash and bank deposits, I have derived performance by using the federal funds rate, (generously) assuming daily compounding interest for 365 days per year.
Tether doesn't provide much detail on Secured Loans (None to Affiliated Entities) -- although on December 13, 2022, it published a blog post simultaneously defending its use of them while also stating that it planned to eliminate its holdings of secured loans entirely by the end of 2023. (Its secured loans assets decreased by just under 6% from the December 2022 to the June 2023 attestations.) In October 2021, Bloombergreported that Tether had made 'billions of dollars of short-term loans to large Chinese companies—something money-market funds avoid. And that was before one of the country’s largest property developers, China Evergrande Group, started to collapse.' Note that Tether's most recent attestations title this asset category 'Secured Loans,' but its Transparency page still uses the more detailed title 'Secured Loans (None To Affiliated Entities).'
As of its March 2023 attestation, Tether now breaks out Corporate Bonds, Precious Metals, and Bitcoins into discrete categories. It has also split its repurchase agreements assets into two separate categories: Overnight Reverse Repurchase Agreements and Term Reverse Repurchase Agreements. The main differences between the two appear to center around duration (overnight indicates a 1-day maturity, while term is under 90 days) and collateralization (overnight is collateralized by U.S. Treasuries, while the collateral of term agreements is not revealed). As of now, I have therefore selected the ICE BofA US Corporate Index as a representative indicator for the collective portion of Tether's assets listed under:
Secured Loans (None to Affiliated Entities)
Overnight Reverse Repurchase Agreements
Term Reverse Repurchase Agreements
Per FRED, the ICE BofA US Corporate Index tracks 'the performance of US dollar denominated investment grade rated corporate debt publicly issued in the US domestic market.'
For Precious Metals, I have used the SPDR Gold Shares (GLD) price, as Tether's March 2023 attestation states: "The 'Precious Metals' category comprises LBMA standard physical gold bars owned by the Group."
Now that Bitcoins have been broken out into their own category, I simply apply the Bitcoin price to this asset class.
The section marked Other Investments remains vague (even now that the parenthetical 'Including Digital Tokens' has been removed from Tether's Transparency page for this asset class). In early December 2022, Semaforreported that 'a global investigations firm commissioned by a hedge fund betting against the price of Tether...found Tether holds equity stakes in more than a dozen crypto startups.' Due to the lack of transparency around these investments, I have simply applied the S&P 500 index to this asset class. (As always, you can swap this out for alternative prices in the options below the portfolio chart.) (Note also that, as of its March 2023 attestation, Tether has now updated its intangible digital assets accounting from being 'valued at lower of cost or market in line with IAS 2' to 'valued at fair value.')
Finally, Non-U.S. Treasury Bills are such an insignificant portion of Tether's self-reported assets (approximately 0.07% as of its September 30, 2023 attestation) that I will assume they are statically priced.
Also note that, when calculating the number of hypothetically insolvent days, I am only including dates for which I have Tether data. On some dates either Tether never updated its Transparency page or my crawler was unable to obtain the data for that date, in which case this data is left out of the insolvency calculation.
Added Tether's September 30, 2023 attestation data.
Added new stacked area chart displaying Tether's asset portfolio over time.
Added Tether's June 30, 2023 attestation data.
Added the price of gold and associated it with Tether's Precious Metals investment category.
Added Tether's March 31, 2023 attestation data.
Fixed SGOV re-balancing bug that affected price. Thanks again to @DipsBuy for spotting this.
Added Tether's December 31, 2022 attestation data.
Added Tether's June 30, 2022 attestation data, in order to enable switching between multiple attestation baselines.
Changed Commercial Paper and Certificates of Deposit allocations from static pricing to using the Vanguard Federal Money Market Fund (VMFXX) returns instead.
Fixed default Treasury bill calculation. Updated it from my original calculation, which looked only at market prices for 4-week Treasuries and ignored interest income, to the iShares 0-3 Month Treasury Bond ETF (SGOV) total return price. Thanks again to @DipsBuy and @arielstulberg for the tips.
Changed default money market and bank deposit allocations from national retail money market and bank rate averages to Vanguard Federal Money Market Fund (VMFXX) and a price derived from the federal funds rate, respectively. Thanks to @DipsBuy and @arielstulberg for the tips.