Tether Holds $3.4 Billion In Gold Reserves, Nears ATH Market Cap 1 Year Post Terra Collapse

Tether (USDT), the world’s largest stablecoin by market capitalization, was one of the dollar-pegged cryptocurrencies to have been affected by the collapse of the Terra ecosystem. Now – a year later, the stablecoin has reclaimed its stable dollar peg and boasts one of the deepest reserves in the cryptocurrency industry.

Gabor Gurbacs, on Friday, May 12, provided an insight into the significance of precious metals to Tether’s financial setup. Interestingly, Gurbacs, the founder of PointsVille, dubbed Tether’s USDT a “precious metals powerhouse”.

According to Gurbacs’ tweet, Tether Holdings Limited, the issuer of the USDT stablecoin, has placed substantial importance on gold, forging a solid reputation in the industry. His tweet also reveals that USDT, the third-largest cryptocurrency by market cap, has a staggering sum of roughly $3.4 billion in reserves held in gold.

Tether Gold-assets are around $3.4 Billion. XAUT AUM is around $500mm. Tether is now a precious metals powerhouse.

Don't underestimate the Tether team. High integrity and hard working team that supports Bitcoin, commodity technologies and financial inclusion. pic.twitter.com/0JPvNUk6n5

— Gabor Gurbacs (@gaborgurbacs) May 12, 2023

In the same breath, Gurbacs noted that approximately $500 million backs the circulating supply of Tether Gold (XAUT), Tether’s gold-pegged stablecoin. Furthermore, the amount of gold in Tether reserves far outweighs that of Bitcoin (BTC), which stands at about $1.5 billion. 

From Gubarcs’ perspective, the diversity of the USDT reserves – which consists of gold, cash, corporate bonds, BTC, etc. – helps protect the stablecoin against potential market collapses and unexpected negative events. Considering his advisory role within the firm, it may be fair to consider Gubarcs’ analysis of Tether’s financial strategy as an insider viewpoint. 

In one of the most catastrophic events in the crypto industry, the Terra ecosystem collapsed in May 2022, with its UST stablecoin losing its dollar peg. The ripple effect saw investors lose faith in most dollar-backed assets, including Tether USD. This caused the panic sale of these dollar-backed assets.

As a result, Tether’s dollar peg broke momentarily, with the token falling as low as 92 cents at times. Furthermore, two months after the Terra collapse, Tether’s market capitalization had dropped by roughly $16 billion to $65 billion, an indication of massive withdrawals by token holders.

While this unfortunate event was an unexpected test of USDT’s resilience and stablecoins, as an entity, many would agree with the fact that Tether passed the test resoundingly. After all, USDT regained its dollar peg only two months after the crash.

Meanwhile, in terms of market capitalization, USDT has made a robust recovery since. In fact, USDT’s market cap currently stands at $82.9 billion, according to data from CoinGecko. This means that the stablecoin is now more than ever closer to its all-time high market cap of $83 billion.