Choreographing Cryptocurrency: A Tale of USDT and Tactics
In the realm of cryptocurrency, Conor Grogan, a perceptive director at Coinbase, brought to light compelling insights from the intricate world of blockchain data. This trove of data vividly showcased Alameda Research's impressive feat—a staggering redemption sum exceeding a breathtaking $38 billion in Tether (USDT) tokens during the course of the eventful year that was 2021. The intrigue deepened as this redemption extravaganza unfolded, all while their reported assets under management seemed to exist in a different dimension altogether.
Onchain data shows that Alameda was responsible for minting $39.55B of USDT, a number that is 47% of Tether's circulating supply today— Conor (@jconorgrogan) October 9, 2023
A previous report by Protoss estimated the number at around $36.7B; I was able to update these figures with additional wallets I found pic.twitter.com/fYBvGAYlFd
Notably, during the euphoric peak of the bullish wave that swept through the cryptocurrency market in 2021, the total value of USDT creation soared past the celestial heights of Alameda's documented assets. Grogan subtly alluded to the possibility that the orchestrated USDT redemptions, orchestrated with finesse by FTX, likely sourced their bountiful reserves from Alameda's vast token reservoir, an impressive cache totaling an astonishing 3.9 billion USDT. The grandiose scale of this redemption saga played out against the dramatic backdrop of Terra's algorithmic stablecoin experiencing a tumultuous collapse.
As January unfolded its days in 2021, the sagacious former Alameda co-CEO, Sam Trabucco, lent his voice to the conversation, shedding light on the prevailing reports surrounding the creation of significant USDT volumes masterminded by Tether. In a display of generosity, Trabucco shared enlightening perspectives, offering a glimpse into the art and science of arbitrage opportunities intricately woven into the ever-fluctuating value of USDT across a diverse tapestry of trading pairs and a multitude of exchanges.
BTW, to connect some dots here -- a lot of the people seeking access to a coin like USDT *aren't* doing so via creation. They're often doing so via just sorta buying it in the markets -- and they're buying a LOT, and REALLY aggressively. https://t.co/pKRj3AMJ9D— Sam Trabucco (@AlamedaTrabucco) January 11, 2021
Trabucco, with the finesse of a maestro conducting a symphony, delved into the intricate dynamics of the premium, notably the gentle ebbs and flows of USDT's trading value in relation to the steadfast $1 mark. It was a nuanced dance, and he revealed the subtle volatility observed in Bitcoin (BTC)-to-USDT trades, a delicate deficit that made its presence known when compared to the robust BTC/USD trades.
Furthermore, Trabucco underscored the contrasting stability of USD Coin (USDC), a stablecoin firmly anchored to the sturdy United States dollar. He attributed this stability to the meticulous creation and redemption processes meticulously orchestrated within the USDC realm. This intriguing tidbit held the attention, revealing that most market participants chose the scenic route, engaging in USDT trading activities through secondary markets, gracefully bypassing the allure of direct acquisitions from Tether’s treasury. This pattern emerged due to the unique privilege enjoyed by select firms, enabling them to partake in the sacred art of USDT creations and redemptions.
In a strategic ballet of sorts, Trabucco shone the spotlight on Alameda's tactical prowess, deftly leveraging their sophisticated setups and deploying an ensemble of automated trading bots across the grand stage of various exchanges. This was their ballet, and it showcased a strategic symphony that allowed them to adroitly seize the spotlight when USDT soared beyond the hallowed $1 threshold. It was a dance of profit, a duet performed with grace. Alameda's adeptness in orchestrating USDT creations and redemptions on demand underpinned a symbiotic relationship, proving to be a masterstroke, a win-win scenario that transcended the boundaries of mere trading.
Indeed, Alameda donned the hat of advantage, harnessing this strategic ballet, and gracefully pirouetted through the cryptoverse, capturing the ethereal premium associated with arbitrage opportunities. The narrative gained an extra layer of intrigue and credibility as Sam Bankman-Fried, a luminary in his own right, added his voice to the melody, affirming their active engagement in redeeming USDT for the reliable U.S. dollars during the intriguing debates and conversations that played out in the vibrant year of 2021. The plot thickened, and the waters shimmered with the intricate dance of value, arbitrage, and the artistry of financial orchestration.
It's sort of funny hearing people claim that you can't create/redeem USDT for $.— SBF (@SBF_FTX) January 12, 2021
Like, I don't know what to tell you, you can, and we do. https://t.co/8XthTsk1xr