Sam Bankman-Fried’s Alameda Research ordered enormous USDT mints in 2021, as chain data flagged by Coinbase director Conor Grogan indicated.
Alameda Research redeemed over $38 billion in Tether tokens in 2021 despite not managing the corresponding amount of assets, according to blockchain data flagged by Coinbase director Conor Grogan.
According to Grogan, the total value of USDT creation was greater than Alameda’s total assets at the peak of the bull market for cryptocurrencies in 2021.
Grogan also suggests that FTX-ordered USDT redemptions, totaling 3.9 billion USDT, were presumably from Alameda’s tokens.
During the collapse of Terra’s algorithmic stablecoin, most of this redemption amount was performed.
Sam Trabucco, the former co-CEO of Alameda, weighed in on prevalent reports of significant USDT mints conducted by Tether in January 2021 and revealed how Alameda profited from arbitrage opportunities pertaining to the value of USDT to various trading pairs across exchanges.
Trabucco characterized the volatility of the premium at which USDT trades to $1, given that Bitcoin-to-USDT trades resulted in a slight deficit in basis points relative to BTC/USD trades.
Trabucco went on to clarify that other U.S. dollar stablecoins, such as USD Coin, had a less volatile premium due to the USDT’s creation and redemption process.
“And note, *these* are the best markets to use to determine where USDT is trading — the combo of BTC/USDT and BTC/USD markets, e.g., are WAY more liquid than any exchange’s USDT/USD market, so the prices from these (even though its a two-leg trade) matter way more.”
Given that only a limited number of firms can create and redeem USDT, most market participants acquire and trade USDT from the markets rather than directly from Tether’s treasury.
“And when USDT gets above $1? A sophisticated firm like Alameda with great setups on all the exchanges and bots to execute more than one leg at a time is gonna want to sell! And we do — a LOT.”
Trabucco added that Alameda was able to “safely put on big bets” due to its ability to create and redeem USDT when necessary.
The former CEO of Alameda characterized it as a “win-win” situation for both the trading firm and the dollar peg stability of USDT:
“Obviously we’re making money because we can, e.g., selling above where we create, but we’re also bringing the price in line so that when aggro buyers come in, it sticks close to $1.”
Due to its ability to create USDT tokens, Alameda profited by collecting the premium on arbitrage opportunities.
Sam Bankman-Fried himself weighed in on the controversy in 2021, stating that Alameda actively exchanged USDT for U.S. dollars.
