Despite the ongoing concerns about Tether’s lack of an appropriate audit report on their reserves, capital continues to flow from USDC and BUSD to USDT. This trend has caught the attention of many market participants, who are curious about the reasons behind it.
Interesting to see capital rotating out of USDC and into USDT (Tether) amidst these regulatory concerns pic.twitter.com/cAUhUEzMqq
— Will Clemente (@WClementeIII) February 13, 2023
The lack of an appropriate audit report on Tether’s reserves is one of the primary concerns that people have raised about USDT. Many experts have pointed out that Tether has yet to undergo a proper audit of its reserves, which has led to suspicions that the stablecoin may not be fully backed by dollars. While Tether has released an attestation report in the past, this report was not a full audit and did not provide a complete picture of Tether’s reserves.
This lack of transparency has led to some market participants losing faith in USDT and turning to other stablecoins that are more transparent and have undergone proper audits. USDC, for example, has been praised for its transparency and for its regular audits by the accounting firm Grant Thornton. BUSD, which is backed by Paxos, has also been lauded for its transparency and for being regulated by the New York State Department of Financial Services. However, with SEC’s case against BUSD, many volumes in Crypto are now being stored in USDT.
Despite the concerns about Tether’s lack of transparency, however, capital continues to flow from USDC and BUSD to USDT. According to data from Glassnode, the total supply of USDC and BUSD held on exchanges has decreased by 5% and 9%, respectively, since the start of the year, while the total supply of USDT held on exchanges has increased by 4%.
It’s worth noting, however, that some market participants are still switching to other stablecoins. According to data from Dune Analytics, the total value locked in USDT on decentralized finance (DeFi) platforms has decreased from over $10 billion in mid-January to around $7 billion as of mid-February. During the same period, the total value locked in USDC on DeFi platforms has increased from around $5 billion to over $9 billion.
This suggests that while USDT may still be dominant in the centralized cryptocurrency markets, it is losing ground in the decentralized markets. This trend may continue if Tether does not address the concerns about its lack of transparency and undergo a proper audit of its reserves.
In conclusion, the capital flows from USDC and BUSD to USDT despite Tether’s audit concerns have raised some eyebrows in the cryptocurrency community. While there are several potential reasons for this trend, it is clear that Tether’s lack of transparency is still a concern for many market participants.