In a recent report, Deutsche Bank analysts highlighted red flags in the stablecoin market, predicting an imminent doom for most stablecoins.
According to the bank’s research, most stablecoins, including Tether (USDT), have questionable credibility, lack transparency, reserve backing, and robust operational controls. This report contrasts Ripple’s stablecoin market value estimation of $3 trillion by 2028.
Deutsche Bank’s Report Highlights
After assessing 334 pegged currencies (stablecoins), Deutsche Bank analysts discovered that only 14% have survived until now. In the research note published on May 7, the analysts noted that some stablecoins may survive while many will likely crash.
In the note, Deutsche Bank said most stablecoins lack credibility, backup reserves, and strict operational controls, which is crucial for maintaining stability.
Given the lack of these crucial attributes, Deutsche Bank says the 30% de-page rate witnessed among stablecoins is unsurprising. The report also noted that many defunct stablecoins go unnoticed and are not accounted for.
The analysts also cited the implosion of the TerraUSD stablecoin and its ecosystem. The crisis had a ripple effect, draining over $40 billion worth of funds from the crypto market.
The report notes that such events underscore stablecoins’ inherent risks and volatility, emphasizing the need for stringent regulation and improved transparency in the crypto market.
Additionally, the research team expressed suspicion about Tether’s stance as the dominant stablecoin in the market. It raised doubts about USDT’s solvency and standards for crypto derivatives.
The research team questioned Tether’s dominance in the stablecoin space, noting that it lacks transparency and is only advanced via industry speculations. The team highlighted Tether’s record of misleading information on reserve holdings, which has landed it $41 million in fines from the CFTC.
Also, a recent report cited Tether (USDT) as the most-used stablecoin for criminal activities.
Subsequently, the research team highlighted some possible risks associated with USDT’s dominance in the crypto derivatives market. This dominance could aggravate losses and increase leveraged trades.
Tether Rebuffs Deutsche Bank’s Report
In response to Deutsche Bank’s report, Tether released a quarterly report as proof of its reserves prepared after settlements with the CFTC and New York authorities.
In a statement, Tether rebuffs the research report, saying it lacks substantial evidence and clarity. The stablecoin issuer noted that Deutsche Bank attempted to forecast a stablecoin decline but failed to support its claims with substantial data.
According to CoinMarketCap’s ranking, Tether is the third-largest crypto asset in terms of market cap. Also, it is the #1 stablecoin, boasting the largest market cap.
As of May 10, Tether boasts a market cap of $110.94 billion, with a trade volume of $46.37 billion, representing a 4.99% increase in the past 24 hours.
According to CoinMarketCap data, the volume of all stablecoins is $58.44 billion, constituting 91.00% of the cumulative crypto market 24-hour volume.
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