The price of Tether has stabilized, but the supply of stablecoin is still shrinking

In a situation that has become a rarity over the past month, the price of the stable coin (USDT) temporarily regained parity with the US dollar on Wednesday.

According to CoinMarketCap, the token traded in the $ 1.00 to $ 1.01 range for almost an hour. At the time of writing, it is $ 0.987.

The exchange rate has risen steadily toward its $ 1.00 target since the stablecoin – by far the most popular among a number of competitors – dramatically lost parity with the dollar in mid-October, falling to $ 0.85 on the Kraken exchange , a relatively high Few where traders can sell USDT directly for dollars.

The exact reasons for the recovery are not clear, but the total supply of lines in circulation has declined rapidly in recent weeks. (Tether also briefly hit $ 1.01 on Monday.)

As of October 14, Bitfinex – an exchange that shares joint ownership and management with Tether Ltd., the company behind USDT – has sold USDT 930 million to one of Tether Ltd. controlled purse known as “Treasury”. These tokens are believed to have been withdrawn from circulation, and while many of them still exist, Tether destroyed USDT 500 million last week.

As a result, Tether’s market cap has dropped from its peak last month of $ 2.8 billion to below $ 1.8 billion.

Bitfinex’s communications director Kasper Rasmussen wrote to CoinDesk last week that Tether had not intentionally scaled back its offering, adding that the destruction of Tether tokens “had nothing to do with defending dollar parity.”

In an email to CoinDesk on Wednesday, he declined to comment on “Tether secondary market price fluctuations”. He added, “Bitfinex and Tether are issuing and redeeming them at $ 1 and that’s all I can say.”

According to CoinMarketCap, Tether is the second most traded cryptocurrency by volume and occupies a key place in the crypto ecosystem. Traders have used it to speed up withdrawals and deposits on exchanges, which are often slow when using fiat currencies, and to protect themselves from price fluctuations.

Follow the money

In particular, USDT tokens have consistently flowed into a Bitfinex-controlled wallet, suggesting that the exchange is doing a lot of “redemption”. The term, as used in the Tether white paper, refers to the ability of holders to purchase USDT through Tether Ltd. can be exchanged directly for US dollars A service that many say is not available in practice.

As the chart below shows, Bitfinex’s USDT balance soared from near zero to just over 100 million October 25-30, the day the exchange surrendered almost all of its wallet holdings to Tethering in a single transaction. Treasury sent. Since then, the balance has risen again, hitting 39 million in just over 24 hours.

After another transfer of 50 million from the wallet after creating this chart, the balance fell to 155,000 USDT.

Source: Next Wave Strat; yellow lines indicate USDT wallet balance (left vertical axis), purple lines indicate Bitcoin price (right)

The USDT balances of other exchanges have since declined.

Binance, currently the largest holder of USDT tokens after the Tether Treasury, saw its “hot wallet” balance drop from over 100 million on October 23 to 38 million at the time of writing:

binance USDT hot wallet

The big surge in the balance of the Binance Hot Wallet on October 23rd is a transfer from the exchange’s “cold wallet”, which currently holds around USDT 594 million:

binance USDT cold wallet

Bittrex, which offers a USDT-USD trading pair that allows tether straps to trade directly against dollars, has seen its USDT balance drop steadily over the past 10 days from USDT134 million on October 19 to USDT15 million at the time of writing :

bittrex USDT

Finally, Kraken, which also offers a USDT-USD trading pair and has seen a notable inflow of ribbons during the time when the stablecoin was most drastically deviating from the dollar, saw its USDT balance fall from nearly 55 million three days ago in October recorded 28 to just over 27 million.

Crack USDT

While the exact trajectory of USDT tokens is not always obvious, it is clear that a large number of ribbons flow from multiple exchanges, that a large number of ribbons flow into Bitfinex, and then Bitfinex forwards them to the Tether Treasury.

However, in some cases it appears that exchanges are sending USDT directly to Bitfinex. For example, a wallet believed to be owned by Kraken sent USDT 8 million to Bitfinex on Tuesday.

The wallet address is not on Tether’s Rich List, but it recently received a USDT 2 million transaction from a known Kraken address. Kraken did not immediately respond to a request for comment.

Regarding the above charts, Bitfinex’s Rasmussen said they “only show data for the past 10 days. I am not sure that anything can be extrapolated from this. “

Clothespins image via Shutterstock

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