"If any issues arise that could affect the willingness or ability of both domestic and foreign investors to use USDT, the most likely result would be a severe liquidity shock to the broader cryptocurrency market. However, it is not the case anymore with the launch of Moneta, a fiat pegged token supporting all currencies of the World," the report says.
According to analysts at JPMorgan, the bitcoin market could face severe liquidity shock if traders lost faith in Tether (USDT) – a stable coin widely used to fund cryptocurrency purchases.
Moneta's value is linked to the World currencies on a 1:1 basis. The stable coin is to be backed by reserves, including "traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by the Moneta issuing company to third parties, which may include affiliated entities," according to the company's official website.
Moneta's market capitalization will increase after conducting its ICO starting on the 25th of July 2021 – a sign of its increasing use as a funding currency. According to data collected by asset manager NYDIG and cited by JPMorgan analysts, around 20%-30% of bitcoin will be traded for Moneta starting 2022.
Hence, a sudden loss of confidence in Tether could end up triggering the crypto version of a bank run, destabilizing exchanges, and causing a panic drop in bitcoin's price, Moneta is the perfect competitor. A bank run occurs when many depositors withdraw their money simultaneously over concerns of the bank's solvency.
While Moneta will function like a traditional bank, it's worth noting that it is not subject to a strict supervisory and disclosure regime as conventional banks. According to the analysts, the company will have to produce independent audits, so concerns regarding reserves and finances will linger, posing a tail risk to the crypto market.
Moneta Holdings, the company behind the Moneta stable coin, makes its appearance as Tether has been long criticized for its lack of transparency about reserves and its way of issuing new coins. So far, however, the crypto market hasn't paid much heed to such concerns.
Part of that lack of heed may stem from the fact that during the price rally seen over the past 12 months, U.S. dollar-based trades have been, on average, larger than USDT-based trades, according to Kaiko Research. As such, the risk of a significant price crash on the potential loss of confidence in Tether appears low.
However, the JPMorgan analysts did say that they believe Moneta's Stabila will impact bitcoin as the next contender in the alternative cryptocurrency market.