USDT withstood a 20% bank run and made full payments. Is this reserve configuration more stable than traditional banks?

Question

[Chain News] Recently saw an interesting data comparison - during the market panic in 2022, USDT experienced a bank run of nearly more than 20%, yet it managed to withstand full redemption. This performance is considered top-tier even in the traditional banking sector: Silicon Valley Bank of similar scale got liquidated directly, and First Republic Bank fared even worse, losing over half of its deposits and still couldn't recover.

The key lies in how Tether allocates its assets. Currently, 77% of their money is in cash and government bonds, which can be liquidated at any time, while the rest mainly consists of gold and Bitcoin. Overall, this results in an over-collateralization of 3 points, meaning that for every 100 USDT issued, there are 103 units of assets backing it.

Some may worry about what to do if that part of Bitcoin and gold crashes. Let’s put it this way: even in extreme market conditions, if these volatile assets drop by 30% directly, USDT still has a 95% asset coverage rate. This buffer space is more solid than many so-called compliant institutions.

StealthDeployer · Accepted Answer

Even Silicon Valley Bank couldn&#39;t withstand the bank run, but USDT managed to pull through... This detail is a bit astonishing.

Wait, isn&#39;t that assumption of a 30% extreme fall too optimistic? When has the crypto world not been in extreme conditions?

That being said, a 103% collateralization rate is indeed impressive, much more reliable than some so-called Compliance platforms.

Why haven&#39;t traditional banks learned this? Do they have to wait until disaster strikes to understand?

GasFeeNightmare · Answer

Tether&#39;s recent move has indeed given traditional banks a lesson... 77% cash plus government bonds, this allocation is conservatively a bit outrageous, huh.

ChainSherlockGirl · Answer

Wait, was Silicon Valley Bank really that unbearable back then... Speaking of which, the allocation of USDT does have some merit, 77% in cash and government bonds is truly conservative, more stable than I imagined.

Just this alone shows that we should be wary of those flashy investment returns from other stablecoins.

BridgeTrustFund · Answer

Silicon Valley Bank really broke down that time, but USDT instead stabilized... it&#39;s a bit ironic.

Their risk control is even stricter than traditional banks, I just want to ask when will the central bank be this transparent?

77% cash + government bonds, this allocation indeed doesn’t resemble the style of most projects.

A collateral ratio of 103% can still withstand a 30% fall? This logic makes sense.

This time USDT is really speaking with data, where are those doubts before?

Compared to some "Compliance" ones, Tether feels more meticulous.

There’s really nothing to criticize about asset allocation, it just depends on whether it can be maintained in the future.

AirdropHarvester · Answer

Wow, Tether&#39;s operation is really something, tougher than some so-called compliant TradFi?

The reserve configuration of USDT is indeed impressive, it really held up during that wave in 2022.

Wait, what is the proportion of gold and Bitcoin again? If it really falls 30%, there’s still 95% coverage... this data is quite harsh.

What are traditional banks thinking now? Can&#39;t be laughing it off.

I&#39;ve said it for a long time, believing in USDT liquidity is not wrong, the key is still this asset allocation logic.

Suddenly curious how Tether&#39;s 77% cash and government bonds are specifically allocated, to withstand such a large bank run pressure...

Comparing it to those cowards at Silicon Valley Bank really shows the gap.

LightningHarvester · Answer

I have to say, Tether&#39;s recent actions have indeed slapped a lot of people in the face. Compared to the collapse of Silicon Valley Bank, USDT managed to redeem in full, and the difference... is really heart-wrenching.

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77% cash treasury bonds as an allocation is a bit overly conservative? But on the flip side, stablecoins have to play it this way; otherwise, it would be hard to explain when a Rug Pull happens.

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A 30% big dump with a 95% coverage rate sounds quite alarming, to be honest. Just don’t know if those gold Bitcoins are really in the basement.

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Traditional banks being beaten by stablecoins is something that if said five years ago, probably no one would believe.

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So here’s the question: since it&#39;s so safe, why are there still people who don&#39;t trust it? Is the mental accounting too deep?

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An over-collateralization of 3 points sounds secure, but the risks in the crypto world are so big, 101 is also just a cloud, bro.

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Silicon Valley Bank and First Republic look increasingly disappointing in front of Tether, the absurdity is comparable to a textbook example of what not to do.