Coinbase‘s director, Conor Grogan, has uncovered blockchain data that sheds light on substantial USDT minting activities orchestrated by Sam Bankman-Fried’s Alameda Research in 2021.
The data from the blockchain, as analyzed by Coinbase’s director, Conor Grogan, reveals that Alameda Research redeemed over $38 billion worth of Tether (USDT) tokens in 2021, even though their assets under management did not appear to justify such massive redemptions.
Grogan’s findings indicate that the creation of USDT tokens surpassed the total assets held by Alameda Research at the peak of the cryptocurrency market’s bull run in 2021.
Grogan also posits that the USDT redemptions, which were seemingly orchestrated by FTX, were likely associated with Alameda’s tokens, totaling a staggering 3.9 billion USDT. A significant portion of this redemption activity occurred during the collapse of Terra’s algorithmic stablecoin.
In January 2021, former co-CEO of Alameda, Sam Trabucco, chimed in on the reports of substantial USDT minting by Tether. He provided insights into how Alameda profited from arbitrage opportunities tied to the value of USDT across different exchanges. Trabucco pointed out that the premium at which USDT traded compared to $1 was often volatile. This volatility stemmed from the fact that Bitcoin-to-USDT trades resulted in a slight deficit in basis points compared to BTC/USD trades.
Trabucco emphasized that markets involving BTC/USDT and BTC/USD were the most reliable indicators of USDT’s trading value, surpassing the liquidity of any exchange’s USDT/USD market. As a result, USDT’s value fluctuated more in these markets due to their higher liquidity.
Trabucco further explained that other stablecoins, like USD Coin, exhibited less volatile premiums due to the different creation and redemption processes associated with USDT. Since select firms had the capability to create and redeem USDT, most market participants acquired and traded USDT directly from the markets rather than Tether’s treasury.
Regarding USDT’s value exceeding $1, Trabucco noted that a sophisticated firm like Alameda, equipped with advanced setups and trading bots across multiple exchanges, would capitalize on the opportunity to sell. Alameda took advantage of these situations frequently.
Trabucco highlighted that Alameda’s ability to create and redeem USDT tokens as needed allowed them to make profits by selling above the creation price. This, in turn, helped keep USDT’s value close to $1, benefiting both Alameda and the stability of USDT’s dollar peg.
In conclusion, Alameda’s profitable involvement in arbitrage opportunities was intricately linked to its capacity to create and redeem USDT tokens, an advantage that played a pivotal role in maintaining USDT’s stability. Sam Bankman-Fried, the founder of Alameda, also joined the discussion in 2021, confirming that Alameda actively redeemed USDT for U.S. dollars.
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