Does Chinese recession spell trouble for Tether?

Come to think of it, I write very few stories about Tether, although it is the third largest cryptocurrency if you look at it in terms of market capitalization. That is of course because Tether is a stablecoin that does not or hardly ever moves even a cent.

Traders use Tether to have a place between buying and selling moments where you can ‘park’ your investment, as it were. When Tether makes the news it is usually bad, like the time just after the collapse of Terra last year, when Tether saw some 10 billion dollars in market value disappear in just one week and many feared on run on funds.

For any other company, such an outflow of funds would probably be fatal, but for Tether it was only a drop in a bucket.

This is because they had invested neatly in securities around the world. Chinese stocks, US bonds, foreign coins, gold, oil funds and much more. Tether had diversified its investments and, to be fair, had its affairs well in order.

Chinese stocks

And yet. In the last week there have been reports again, just like last year, that the largest stablecoin in the crypto world may be in trouble. First, there is the Chinese recession, which has forced Tether to sell many of its Chinese investments and exchange them for US bonds. In essence, crypto value is once again shifting to the US from China. A movement that has been going on for several years.

Secondly, according to Bloomberg, Tether finally has a real competitor in Paypal’s new stablecoin. For example, Tether’s market capitalization fell again last week by a billion or so.

The coin itself does not seem ready to move yet and, as the name suggests, remains quite stable. Hopefully it will remain in this state if Paypal’s stablecoin continues to exponentially grow.