The latest data from blockchain analytics indicates that Alameda Research, a cryptocurrency trading firm, redeemed more than $38 billion worth of Tether (USDT) tokens in 2021. This is despite the fact that Alameda did not have the equivalent assets under management at the time.
Conor Grogan, a director at Coinbase, flagged the blockchain data that revealed the significant amount of USDT creation by Alameda. Grogan also noted that this amount accounted for around 47% of Tether’s circulating supply at the time.
Furthermore, Grogan suggested that a substantial portion of the USDT redemptions ordered by FTX, a leading cryptocurrency exchange, were likely from Alameda’s tokens. Specifically, Alameda is believed to have redeemed 3.9 billion USDT, with a majority of these redemptions occurring during the collapse of Terra’s algorithmic stablecoin.
In January 2021, Sam Trabucco, a former co-CEO of Alameda, shed light on the significant USDT mints carried out by Tether. He explained how Alameda took advantage of arbitrage opportunities associated with the value of USDT relative to various trading pairs across different exchanges.
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Trabucco stressed that the premium at which USDT trades to $1 was often volatile. He noted that Bitcoin-to-USDT trades resulted in a slight deficit in basis points when compared to BTC/USD trades. He emphasized that such trades were the best markets to determine where USDT was trading, as they were more liquid than any exchange’s USDT/USD market.
In contrast to other stablecoins like USD Coin, which had a less volatile premium, USDT’s creation and redemption process led to price discrepancies. Trabucco explained that while select firms can create and redeem USDT, most market participants acquire and trade USDT from the markets themselves rather than directly from Tether’s treasury.
Alameda leveraged its ability to create and redeem USDT tokens, effectively profiting from the premium on arbitrage opportunities. Trabucco emphasized Alameda’s ability to “safely put on big bets” due to its flexibility with USDT creations and redemptions, which benefitted the trading firm and helped maintain USDT’s dollar peg.
Interestingly, Sam Bankman-Fried, the founder of FTX and affiliated with Alameda, confirmed that Alameda actively redeemed USDT for U.S. dollars in response to the ongoing debate about USDT’s creation and redemption capabilities.
Cointelegraph has reached out to Tether for confirmation on the amount of USDT tokens minted at the request of Alameda. This development raises questions about the transparency and stability of the USDT token and its impact on the wider cryptocurrency market.
In conclusion, the data indicates that Alameda Research redeemed a significant amount of USDT tokens in 2021, causing concerns about the correlation between the amount redeemed and Alameda’s assets under management. This underscores the importance of further investigation and analysis to ensure transparency and stability within the cryptocurrency market.
