By Geoffrey Smith
Investing.com -- The world's biggest stablecoin by market value, Tether, continued to experience customer outflows on Wednesday, despite denying what it called 'false rumors' about loss exposures.
At least four transfers from crypto exchange Bitfinex to Tether's treasury wallet were made during the day with a combined value of $771 million. Such transfers happen as a rule when customers switch their digital assets back into fiat currency such as dollars.
As a result, the circulating supply fell by another 1.1% to 70.1 billion. That's down from 83 billion in April, when the collapse of the Terra Luna network led to a first wave of withdrawals.
The withdrawals have gone hand in hand with a widespread rout in cryptocurrency assets but, in contrast, they have not yet translated into a full-blown speculative attack on Tether's 1:1 peg against the dollar, as happened in April after the collapse of the Terra Luna network.
Network collapses such as that of Terra or - last weekend - Celsius are stark reminders of the importance of adequate backing for stablecoins, ensuring that they can keep their value against mainstream currencies. Tether said on Wednesday that it had exited its position with Celsius "with no losses", and also denied any exposure to troubled crypto investment fund Three Arrows Capital.
Tether's reserves have been the subject of some skepticism, due to its history of making misleading statements. As of March, it said 47% of its reserves were held in short-term U.S. Treasuries, but around $20 billion was held in commercial paper. Tether hasn't revealed whose credit stands behind that CP.
That information gap has been filled with rumors in recent days that the bulk of the CP is issued by low-quality Chinese and Asian names and that it is trading at an unusually large discount of 30%.
"These rumors are completely false and likely spread to induce further panic in order to generate additional profits from an already stressed market," Tether said in a statement on Wednesday.
Tether said it had reduced its CP holdings to $11 billion since the end of the first quarter, and said that would fall to $8.4 billion by the end of the month.
"This will gradually decrease to zero without any incurrences of losses. All commercial papers are expiring and will be rolled into U.S. Treasuries with a short maturity," Tether said.