Bitcoin Back Above $30,000 as Tether Holds Strong, but Luna Fails to Recover

© Reuters

By Geoffrey Smith 

Investing.com -- The price of Bitcoin leaped back above $30,000 on Friday at the end of what had threatened to be its worst week in four years. 

By 3:10 AM ET (0710 GMT), the world's biggest crypto asset was up 13% on the Bitfinex exchange at $30,510, having fallen as low as $26,600 on Thursday. That was its lowest since December 2020.

The rebound was due largely to the easing of concerns about Tether, the world's largest stablecoin network, which had dipped over 6% at one stage on Thursday amid concerns about the quality of its backing.

Tether rebounded to trade within a whisker of its 1:1 peg with the dollar in early trading in Europe Friday after its chief technology officer Paolo Ardoino reassured investors that Tether was able to meet all redemption demand comfortably because of the high quality of its reserves. It has processed over 2 billion USDTs in redemptions since the volatility started, Ardoino said via Twitter on Friday.

According to Tether’s most recent data, cash and cash equivalents account for 84% of its reserves, with secured loans accounting for 5.3% and corporate bonds, funds, and precious metals accounting for 4.6%. The remaining 6.4% is held in ‘other investments, including digital tokens’.

Some 52% of Tether’s cash and equivalents - that is, 43.5% of its total reserves - are held in highly liquid, risk-free Treasury bills.

Commercial paper, short-term corporate debt that does carry credit risk, accounts for 36.7% of the cash reserve, or 30.8% of the total reserve.

The remaining part of the cash and equivalents is accounted for by cash and bank deposits (6.4%) and money market funds (4.6%).

Tether doesn’t break out the details of its commercial paper or corporate bond holdings, or the valuation of its holdings of funds and precious metals. Doubts about the quality of the risk-bearing assets have refused to die down completely since U.S. regulators accused it of lying about them for over three years through 2019. The Commodity and Futures Trading Commission fined Tether and its owner Bitfinex over $42 billion for past "misrepresentations" last year.

Tether's wobble had started after another stablecoin, TerraUSD, collapsed earlier in the week. Neither Terra nor the LUNA token that exists on the same network have recovered any meaningful part of their value despite a promise on Wednesday by co-founder Do Kwon to inject fresh reserves. Trading on the Terra blockchain resumed on Friday but was quickly suspended again.