A few months ago when Tether first started disclosing the breakdown of assets that backed up its $1 peg the majority of their backing was in something called Commercial Paper. Commercial Paper, while not the world's worst thing, is still not a great investment for value storage. The reason behind this is while they are short-term loans typically just a couple of months in length they are not secured to anything meaning if they miss a payment there is no an asset they are tied to. 

Now typically it is large companies that issue these types of assets it is not like you or I could do it as no one would want to buy ours. If Ford or Goldman Sacs though huge companies with huge names issue them to cover for some short-term thing like inventory or payroll people would not think twice before buying them since they pay a higher rate than average. This type of holding is great if the economy is healthy and there is no sign of distress.

Since last year though the outlook for the economy as a whole has turned for the worst so holdings like this are not ideal. Tether previously had announced it would be trimming its holdings in this category and would roll the commercial paper into U.S. Treasuries. Just a couple of days ago Tether's CTO announced that over the last 6 months the stablecoin provider had cut its commercial paper backing by 50% which is a pretty incredible feat. Not only that but he stated that he expected in the next few weeks this number to shift even more. 

This is huge as by holding U.S. Treasuries Tether really is holding the top-of-the-line backing for any stablecoin one could have. If they just held cash reserves Tether would miss out on the interest payments that U.S. Treasuries make which is why it is much smarter and much more common to purchase these than it is to just hold on to piles of cash. The pile of cash would grow in the bank account however the Treasuries will have a much higher interest payout and is the most secure thing as it is backed by the government not just backed by a bank. 

Previously this had been a pretty big difference between USDC and USDT as Circle the issuer of USDC had most of their holding already in Treasuries and Tether did not. Now that these two are moving towards holding much of the same things it will be interesting to see the growth of the two. Without the main difference in holdings, it will boil down to the people behind the projects and how they manage their respective companies. 

Both USDT and USDC differ from UST and DAI by the way they are backed. USDT and USDC are both centralized and back their stablecoins with traditional type assets like loans, treasuries, bonds, and precious metals. They are not decentralized and do not have near the risk of collapse that decentralized and overcollateralized coins have. 

Please know I am not a financial advisor I am just someone who picked up on a trend and wanted to express it! Makes sure you always do your own research and never invest money you cannot afford to lose! If you enjoyed this article and would like to further support me below are a couple of referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_

Robinhood

Robinhood is offering a great signup deal if you use my link here where we will both be awarded free stock. All that you have to do is sign up and connect your bank account for the award! With commission-free crypto trading and the ability to set limit orders, it is a great hybrid offering in my opinion! Not to forget the addition of wallets and the ability to send and receive crypto!

Fold App

Offers daily wheel spins to win free sats daily! If you sign up for Fold with my link here you will get 5,000 sats for free!  

Unstoppable Domains

Sign up using my link here and get a free $10 credit towards your first $40+ purchase! 

Coinbase

Sign up for Coinbase and earn $10 of free Bitcoin when you buy or sell $100 in crypto with my referral here!

SMiles

If you are like me and walk to work every day this app rewards your walking with Sats! So far I have earned over 5,000 sats in just a couple of months walking to work! Here is my link!