Blockchain data pointed out by Coinbase director Conor Grogan indicates that Alameda Research redeemed more than $38 billion for Tether (USDT) tokens in 2021 despite having no similar assets under management.
Onchain data shows that Alameda was responsible for minting $39.55 billion in USDT, a number that represents 47% of Tether’s circulating supply today.
A previous report by Protoss put the number at about $36.7 billion; I’ve been able to update these numbers with additional wallets I’ve found pic.twitter.com/fYBvGAYlFd
– Connor (@jconorgrogan) October 9, 2023
According to Grogan, the total value of USDT creation was higher than the total assets Alameda had on its books at the height of the broader cryptocurrency market rally in 2021.
Grogan also notes that the USDT redemptions requested by FTX are likely from Alameda tokens, totaling 3.9 billion USDT. The majority of this recovery amount was carried out during the collapse of the Terra algorithmic stablecoin.
In January 2021, Sam Trabucco, former co-CEO of Alameda, commented on prevailing reports of significant USDT mints carried out by Tether and provided insider insights into how Alameda leverages arbitrage opportunities related to the USDT value of different trading pairs across different exchanges.
BTW, to connect some dots here – a lot of people seeking access to a currency like USDT *don’t* do so by creation. They often do this just by buying them in the markets – and they buy a lot and really aggressively. https://t.co/pKRj3AMJ9D
– Sam Trabucco (@AlamedaTrabucco) January 11, 2021
Trabucco described how the premium at which USDT to $1 trades was typically volatile, given that Bitcoin (BTC) to USDT trades resulted in a slight basis point shortfall compared to BTC/USD trades.
“And note that *these* are the best markets to use to decide where to trade USDT – the mix of the BTC/USDT and BTC/USD markets, for example, is more liquid than the USDT/USD market on any exchange, so the prices of these matters (although It is a two-legged trade) is much more important.
Trabucco went on to explain that other USD stablecoins such as USD Coin (USDC) had a less volatile premium due to the creation and redemption process involved in USDT. Given that selected companies have the ability to create and redeem USDT, most market players obtain and trade USDT from the markets themselves and not directly from the Tether treasury.
“And when USDT crosses $1? A sophisticated company like Alameda that has great setups across all exchanges and bots to execute more than one leg at a time, you’ll want to sell! And we do that – a lot.”
Trabucco added that Alameda was able to “safely place large bets” due to its ability to create and redeem USDT when it needed to. The former Alameda CEO described this as a “win-win” situation for the trading company and stabilizing the USDT peg to the dollar:
“Obviously we make money because we can, for example, sell above where we make it, but we also bring the price in line with that so that when contrarian buyers come in, the price stays close to $1.”
As a result, Alameda has benefited from collecting premium on arbitrage opportunities through its ability to create USDT tokens. Sam Bankman-Fried himself also participated in the discussion in 2021, noting that Alameda redeemed USDT in US dollars.
It’s funny to hear people claim that you can’t create/redeem USDT for a dollar.
Like, I don’t know what to tell you, you can, we do. https://t.co/8XthTsk1xr
– SBF (@SBF_FTX) January 12, 2021
Cointelegraph has reached out to Tether to confirm the amount of USDT tokens minted based on Alameda’s request.
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