Last Updated on May 14, 2023 by Bitfinsider

One of the dollar-pegged cryptocurrencies impacted by the Terra ecosystem collapse was Tether (USDT), the largest stablecoin in the world by market value. After a year, the stablecoin has regained its stable peg to the dollar and now has some of the largest reserves in the cryptocurrency market.

On Friday, May 12, Gabor Gurbacs gave some insight into the value of precious metals to Tether’s financial structure. It’s interesting to note that Gurbacs, the creator of PointsVille, described USDT as a “precious metals powerhouse” for Tether.

Gurbacs tweeted that Tether Holdings Limited, the company that created the USDT stablecoin, has a strong reputation in the market since it has given gold a lot of weight. In addition, his tweet discloses that USDT, the third-largest cryptocurrency by market cap, has astonishing gold reserves of almost $3.4 billion.

In the same sentence, Gurbacs mentioned that Tether Gold (XAUT), Tether’s gold-pegged stablecoin, has a backing of about $500 million. Furthermore, compared to Bitcoin (BTC), which is currently worth roughly $1.5 billion, the amount of gold in Tether reserves is significantly greater.

According to Gubarcs, the USDT reserves’ diversification, which includes gold, cash, corporate bonds, bitcoin, and other assets, helps safeguard the stablecoin against probable market crashes and unforeseen unfavorable events. It may be appropriate to take Gubarcs’ critique of Tether’s financial strategy as an insider perspective given his consulting role within the company.

In May 2022, the Terra ecosystem fell apart, and its UST stablecoin lost its peg to the dollar. This was one of the worst things that could have happened to the cryptocurrency sector. Investors lost faith in the majority of dollar-backed assets as a result, including Tether USD. This led to the panic sale of these assets guaranteed by dollars.

Tether’s dollar peg briefly failed as a result, and the token occasionally dropped as low as 92 cents. Additionally, Tether’s market capitalization has decreased by around $16 billion to $65 billion two months after the Terra collapse, a sign of significant withdrawals by token holders.

While this tragic event served as an unanticipated test of USDT’s resiliency and stablecoins, most would say that Tether as a whole passed the test with flying colors. After all, barely two months after the crash, USDT reestablished its peg to the dollar.

In the meantime, USDT’s market value has recovered significantly since. In reality, according to information from CoinGecko, the market capitalization of USDT is approximately $82.9 billion. The stablecoin is thus getting closer than ever to reaching its all-time high market valuation of $83 billion.