Tether’s Bitcoin (BTC)-denominated loan to Celsius Network has been fully settled without a loss, alleviating concerns that the stablecoin issuer may have oversized exposure to the embattled crypto lender.
In a statement issued on Friday, Tether explained that its loan agreement with Celsius averted any downside risk to its underlying business. Specific, the BTC-denominated loan issued to Celsius was 130% overcollateralized, and the original agreement allowed Tether to liquidate the collateral to cover the loan.
“This process was carried out in such a way as to minimize any impact on the markets and, in fact, once the loan was covered, Tether returned the remaining part to Celsius according to their agreement,” reads in the statement. “Celsius position has been liquidated with no loss to Tether.”
“This process was carried out in a way to minimize 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.” https://t.co/K1cBkaQWWI
– Paolo Ardoino (@paoloardoino) July 8, 2022
“This process was carried out in such a way as to minimize any impact on the markets and, in fact, once the loan was covered, Tether returned the remaining part to Celsius according to their agreement. The position of Celsius has been liquidated without loss for Tether”.
Rumors of Celsius’s insolvency began circulating last month after the cryptocurrency lender was forced to halt withdrawals due to “extreme market conditions.”. Details of the massive losses and liquidity constraints soon leaked out as the company hired new legal counsel to advise on the restructuring.
With the development of the crisis in June, Tether released a statement explaining that its portfolio investments in Celsius had nothing to do with the strength and backing of USDT, the world’s largest stablecoin by market capitalization.
“Although Tether’s investment portfolio includes an investment in the company, which represents a minimal part of our assets, there is no correlation between this investment and our own reserves or stability”the company said on June 13. The same message was conveyed verbatim in Tether’s Friday statement.
USDT is the most widely used stablecoin on the market, but its dominance has waned in the last year. USDT currently has a total market capitalization of $66 billion, according to CoinMarketCap. Circle’s USD Coin (USDC) is a close second with a $55.5 billion market cap.
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