Tether Mints 19 Billion USDT in a Month, Crypto Markets on Alert

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As a seasoned crypto investor with more than a decade of experience navigating this dynamic market, I can’t help but find myself both intrigued and concerned by Tether’s recent minting spree. On one hand, I appreciate the role that USDT plays in providing liquidity to the crypto market, especially during high volatility periods like the current Bitcoin rally above $99,000. The swift injection of liquidity can help stabilize prices and narrow spreads, which is a positive for traders like myself.

On December 6th, Tether produced another 2 billion units of USDT, increasing its collection amassed over several months. With this latest action, the company responsible for the most highly-capitalized stablecoin, USDT, concludes a series of minting operations totaling approximately 19 billion dollars since November 6th.

These actions show that Tether is a significant player in supplying liquidity for the cryptocurrency market. However, they have sparked questions about its transparency and potential threats to the overall system.

Tether Mints 4 Billion USDT This Week

According to Lookonchain’s analysis, Tether produced approximately 2 billion USDT units during the nighttime hours of the U.S. market on Friday. This follows their minting of 1 billion USDT the previous day (Thursday), and another 1 billion USDT two days prior on December 3rd.

6 hours ago, Tether produced another 2 billion USDT! Since November 6th, a total of 19 billion USDT have been generated by Tether across both the Ethereum and Tron networks, according to recent reports from Lookonchain.

Minting involves creating tokens, effectively injecting liquidity into the crypto market. In theory, it helps facilitate smoother transactions while enabling traders to hedge against volatility. The addition of USDT could enhance liquidity, potentially stabilizing prices and narrowing spreads during high trading volumes.

As the value of Bitcoin surpasses $99,000 and exhibits significant volatility, introducing more USDT (Tether) into the market might potentially bring stability to prices, but it could also amplify price swings based on how it’s utilized.

Yet, the massive issuance of Tether tokens, amounting to 19 billion within a month’s timeframe, has sparked debate. Although Tether’s quick response in meeting liquidity needs underscores its usefulness, it also ignites concerns about the possibility of an oversupply if not properly regulated.

Transparency Concerns and Backing Debates

There’s been discussion within the cryptocurrency circle about whether Tether is properly backing up its digital coins as they are created (minting). Some critics believe that if Tether continues to produce a large amount of coins without full disclosure, it could potentially weaken market trust. This concern intensifies if Tether cannot provide evidence of its reserves.

In a transparent manner, trustless systems flourish. Excessive coin creation without clarity may result in doubts, much like drinking poor quality coffee. This was pointed out by a user on platform X.

On previous occasions, this topic has been brought up before. Previously, Tether’s CEO, Paolo Ardoino, has already addressed such issues, underscoring their commitment to a solid backing for their operations.

He stated that stablecoins should maintain reserves primarily in highly secure assets like US Treasury bills to mitigate risks from uninsured cash deposits. Ardoino also cited ongoing discussions with regulators to establish frameworks that secure stablecoin operations.

“Stablecoins should be able to keep 100% of reserves in treasury bills, rather than exposing themselves to bank failures by keeping big chunks of reserves in uninsured cash deposits. In case of bank failure, securities return to the legitimate owner,” Ardoino wrote.

Despite some recent concerns, Tether’s actions show an effort to enhance liquidity through strategic moves. For example, a large amount of USDT is being shifted from inactive blockchains over to Ethereum, addressing the increasing demand on that network.

As a researcher, I find that making these modifications plays a crucial part in maintaining Tether’s position as a key provider of liquidity across both traditional and decentralized marketplaces. In these environments, it is estimated that stablecoins account for approximately 85% of the daily trading volume.

Although these advantages are significant, the rapid creation of USDT also alters liquidity patterns. Smaller blockchains may experience a decrease in activity as USDT supply becomes more concentrated elsewhere. Moreover, an influx of USDT on Ethereum could result in increased network congestion, which might escalate transaction costs during busy trading times.

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2024-12-07 14:22