> they hold excess reserves in Bitcoin

We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.

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Isn’t that the public Tether bitcoin address with over 75K coins?

That is a wallet with a lot of Bitcoins in it. We don't know to what degree it's controlled by Tether. We don't know the degree to which it's otherwise encumbered. If I recall correctly, FTX also pointed to wallets with Bitcoins in them from time to time.

To be clear, I am not saying Tether is committing fraud. Just that to the extent there have been investigations, they came up short, and that them being short is not even among the main risks to their existence.

Isn't the whole argument against Tether that they print Tether out of nothing, buy Bitcoin with it, and now have Bitcoin (and increased the price of Bitcoin)?

Actually, the NYAG settlement doesn’t support that conspiracy theory. The investigation found no evidence that Tether printed USDT ‘out of nothing’ to manipulate Bitcoin. The issues raised were about transparency in Tether’s reserves during specific periods when funds were managed by third parties, not about unbacked issuance. Tether has since updated its policies, making clear the types of assets backing USDT.

> I would also point out they hold excess reserves in Bitcoin.

Regardless of whether that is true or not, seems like a terrible idea. Tether doesn't need backing on the crypto side of the ledger - they can create new tether there. If there is a depeg, it'll be from a large amount of money flowing from Bitcoin -> USD or the like. It is highly likely that will correlate to the price of bitcoin dropping (possibly substantially in the event of a Tether depeg). So I'd expect the valuation of their reserves to correlate in a bad way with the chance of them needing to sell those reserves.

Presumably they're doing this for operational reasons but I wouldn't put much weight to it in a discussion on Tether's resilience.

Plus, being a cynic I'd treat that as evidence against Tether being fully backed. Crypto that Tether owns directly could easily have been purchased without any fiat money entering the crypto ecosystem.

The issue is that "stablecoin" doesn't mean anything legally. US regulators have collectively abdicated their responsibility to create fair rules that encourage innovation while protecting investors and creditors.

Tether publishes their reserves [1], only 4% are Bitcoin. 84% is "cash & cash equivalents & other short-term deposits", 3% is precious metals, 5.55% is "secured loans". They report $5B in net equity, ~4.2%. So basically, if their collection of assets declines in value by 4.2%, they become unable to redeem every coin. There are a _lot_ of ways for that to happen with 87% of their assets in T-bills and money market funds. If the shortest T-bill is 4 weeks to maturity, they have plenty of time to incur interest rate risk (e.g.: Silicon Valley Bank).

[1]: https://tether.to/en/transparency/?tab=reports

One metric of how bonds are susceptible to interest rate changes is duration [1].

My calculations show that for a 4 week to maturity T-bill, the duration is approximately 0.077, meaning that if interest rates go up by 1%, it loses 0.07%. So even if rates go up by 5% in a week, they only lose 0.35%.

The problem with SVB is they weren’t holding very short dated bonds. Pretty much every large company has to deal with interest rate risk but as long as they keep the average duration low it doesn’t tend to be an issue.

[1] https://en.m.wikipedia.org/wiki/Duration_(finance)