Masses of tethers have been redeemed for US dollars
The coins were held previously in an account known as the Tether Treasury. During the past few weeks there has been a huge influx of USDT into the Treasury, especially when the coin lost parity with the US dollar last week as questions arose about the access of Tether to banking services. Usually the value of the coin is stable almost at the same value as the US dollar.
The coin started to slip below par on Oct. 14 and by Oct, 23, a total of 680 million USDT were transferred to the company-controlled Treasury wallet. All of the transfers emanated from an address controlled by Bitfinex, a large cryptocurrency exchange that overlaps with Tether both in terms of ownership and also management.
Bitfinex may be spending Bitcoins to buy tethers
The balance of Bitcoins in Bitfinex’s cold wallet has dropped by about 100,000 coins since early September. This has led some to speculate that Bitfinex is trying to take tethers off the market. This may be to drive the price back up to parity with the dollar or even to exit the stable coin business, as there are several competitors now.
Supply of tethers is dropping rapidly
In just a week and a half the supply of tethers in circulation has dropped by around a quarter to about $2 billion. Now many of those taken out of circulation have actually been destroyed by the Tether company.
Statement by Bitfinex
Bitfinex’s director of communications, Kasper Rasmussen said that the destruction of the coins had nothing to do with defending dollar parity. He says both Bitfinex and the Tether company guarantee redemptions at par. His explanation of the action is that when the number of tethers required for Bitfinex or Tether to operate is exceeded by the number in circulation then tokens are redeemed. He also denied that Tether was intentionally scaling back the supply as the action does.
He said that most of the tokens destroyed came from Bitfinex’s wallet since the exchange is one of Tether’s main customers. The company said that it still had about 466 million tethers in the Treasury for future issuances.
Tethers are said to be redeemable in US dollars directly with the company
The redemption is on the basis of parity and was described in the original white paper for the coin in 2016. The company claims that every tether is backed by a US dollar deposit. However, many skeptics doubt that the tether is full collateralized.
There is disagreement whether redemptions directly with the company take place. Rasmussen claims that customer can. However many others say that it is not possible. In any event it seems complicated. On Bitfinex itself there is no trading of the tether US dollar pair.
Kraken exchange
Kraken is one exchange that does trade the USDT to the US dollar. When the value of tether went below that of the US dollar tethers flooded into the exchange. Bittrex exchange also offers to two as a trading pair but has not seen the same influx.
Bitfinex publishes data for a non-existent trading market
If you go to the CoinMarketCap page on Bitfinex you will find that the second-highest volume during the past 24 hours almost $48 million dollars was the USDT/USD pair linking tether (USDT) with the US dollar (USD). However, there is no such pair on the Bitfinex exchange. A Bitfinex spokesperson pointed out that there was no such pair trading on the exchange and no such pair is listed on the site. The spokesperson said: ” Customers can deposit and withdraw both dollars and tethers at Bitfinex, meaning that it is possible to transfer one for the other through the exchange, but this process is far slower and more involved than placing a trade on the exchange.”
Carylynne Chan, CoinMarketCap’s global head of marketing said the data they list comes from Bitfinex’s own public application interface program (API) which feeds the data to outside applications. Chan said she is confused as anyone else about what the data represents:”With this endpoint, as with others on the site, we try to represent all the pairs that the exchange offers in their API,” she told CoinDesk, adding, “we are continuing to follow up with our contacts at Bitfinex to have them clarify exactly what this endpoint represents, as you asked, but they have not responded to multiple direct requests from our team members.”
However, following the publication of the article referenced, Rasmussen said that the USDT/USD pair tracked deposits and withdrawals from a specific wallet. He did not name the wallet but perhaps it is the Treasury wallet. There is a link to the wallet.
