Analysis of the Risk of USDT Explosion

The asset reserves of USDT are similar to those of money market funds, mainly consisting of cash and high-quality short-term bonds. Looking back at the 2008 financial crisis, the largest money market fund at the time, Reserve Primary, triggered panic due to holding a small amount of Lehman Brothers bonds, leading to large-scale redemptions. This event highlighted the similarity between stablecoins and money market funds in terms of their 1:1 redemption commitment.

To assess whether USDT is at risk of a collapse, two key issues need to be considered:

1. How is the liquidity of USDT asset reserves?
2. Is it possible that USDT will face large-scale redemptions similar to those of money market funds in 2008?

Regarding the first issue, the asset reserve quality of USDT has been continuously improving. The proportion of commercial papers (CP) has gradually decreased, while the proportion of U.S. short-term government bonds (T-Bill) has been steadily increasing. According to the latest data, the proportion of CP has fallen to about 13%, while the proportion of T-Bill may have exceeded 60%. Furthermore, the quality of CP held by USDT is also improving, with the proportion of those rated above A3 reaching 99%.

Recent market volatility has put USDT through a liquidity stress test. Over the past month, USDT has completed approximately $17 billion in redemptions, with a circulating supply decrease of 20%. Notably, during the brief days of the UST collapse, $10 billion in redemptions were completed, demonstrating its strong liquidity.

Regarding the second question, although USDT may temporarily decouple in extreme cases, the likelihood of a large-scale redemption wave is low. Unlike pure investment tools, USDT plays an important role in the cryptocurrency ecosystem. Many trading pair market makers, OTC withdrawal channels, and even some informal trading rely on USDT, and this part of the demand accounts for about 20% of the total issuance.

In addition, the redemption mechanism of USDT limits the avenues for direct redemption, allowing only certified institutions to trade directly with the issuer. This reduces the risk of large-scale redemptions of assets in the short term. 85% of USDT reserves are in cash and cash equivalents, with more than half being highly liquid T-Bills, further ensuring its ability to handle redemptions.

Even in extreme cases, the decoupling of USDT is usually temporary. The market's arbitrage mechanisms and speculative buying will quickly intervene, as seen in previous USDT FUD events.

In summary, the likelihood of a USDT collapse is low. Although the market may experience short-term fluctuations, the fundamentals and market mechanisms of USDT provide strong stability support.