Avanti Financial CEO Caitlin Long Lists Reason for Crypto Market Sell Off
Tether’s latest announcement regarding the stablecoin’s deposits, according to Avanti Financial’s founder and CEO, could have triggered the altcoin selloffs last week. Tether Holdings Limited’s rundown of Tether’s (USDT) holdings, according to Caitlin Long, was not allocated in “short-term, lower-risk, liquid securities,” but instead credit assets of “who-knows-what nature.” Provided that the stablecoin — which is rated sixth with a market valuation of $58 billion — has the ability to pull other tokens lower during a credit market sell-off, the Avanti CEO suggested traders might have got tempted to liquidate other cryptos to minimize their overall market risk.
Long said “If Tether stays a de facto credit hedge fund by investing reserves this way, markets now can safely predict that Bitcoin and crypto prices will likely exhibit high correlation with credit markets. They will probably correct together.”
Long further stated that regulators could also want to clamp down on stablecoins as a result of Tether’s complete reserve breakdown, but that regulatory clarification will be beneficial to the crypto sector:
“One of the best things for industry at present would be getting stablecoins to be okay with U.S. regulators, especially the Fed and the SEC. Stablecoins are very important bridges between crypto and the U.S. dollar.”
Cash and equivalents account for 75.85% of USDT backing, as per the Tether Holdings Limited data, with corporate debt representing 65.39% of this group.
— Caitlin Long 🔑 (@CaitlinLong_) May 15, 2021
Long argued that any market repercussions would have been “completely avoidable” if Tether had spent more in Treasury Bills, which accounted for just 2.94% of its overall currency, cash equivalents, other short-term reserves, and commercial debt, instead of riskier investments.
The CEO’s remarks came after Bitcoin (BTC) declined to $46,000 on a few exchanges — the crypto currency is currently trading at $43,188 at the time of writing, down more than 25.3% in the last seven days.
Nevertheless, there is no clarity on what effect Tether’s announcement has on the crypto sector. Binance was still in the news when Bloomberg reported that the US Justice Department and the Internal Revenue Service were looking at the cryptocurrency platform for suspected “illicit conduct.”