Worries that Tether might have an excessive vulnerability to the troubled crypto lender Celsius Network have already been allayed by the fact that the stablecoin issuer’s credit to Celsius Network in Bitcoin (BTC) has been entirely redeemed without a loss.
Tether’s loan agreement with Celsius eliminated risk on core business
Tether highlighted in a statement released on Friday how its loan agreement with Celsius eliminated any risk to its core business. The original arrangement permitted Tether to liquidate the security to pay down the loan because the BTC-denominated debt made to Celsius was 130% overcollateralized. The process was conducted to limit any potential impact on markets.
The statement from Tether indicated, “This process was carried out in a way to minimise as much as possible any impact on the markets and in fact, once the loan was covered, Tether returned the remaining part to Celsius as per its agreement. Celsius position has been liquidated with no losses to Tether.”
In June, after the cryptocurrency lender was compelled to cease withdrawals because of “extreme market conditions,” rumors about Celsius’ bankruptcy started to spread. As soon as the company hired new legal counsel to provide restructuring advice, information about enormous losses and liquidity issues started to emerge.
Tether is the largest stablecoin in market value.
Tether, the biggest stablecoin in by market value, released a statement in June while the situation was developing to clarify that its financial assets in Celsius had little to do with the stability and support of USDT.
The company indicated on June 13, 2022, that there was no connection between the investment and its stability or reserves. According to the company, its investment portfolio also includes an investment in the company, which constitutes a minor part of its shareholder ownership.
Although USDT is the most popular stablecoin available in the market, its sway has waned in recent months. According to CoinMarketCap, the entire market value of USDT is approximately $66 billion. Circle’s USD Coin (USDC), which has a valuation of $55.5 billion, closely contests second place.