Tether Limited, issuer of the dollar-pegged cryptocurrency tether (USDT), has yanked nearly a quarter of the controversial stablecoin’s market cap out of circulation since the beginning of October.
On Wednesday, cryptocurrency exchange Bitfinex sent another 50 million USDT to the Tether Treasury, marking the sixth time this month that the company — which shares a management team with Tether — pulled USDT out of circulation by depositing them into the treasury address. Tether has not issued any new tokens in October, and the last time that new tokens entered circulation was on Sept. 21, when the treasury sent 50 million USDT to Bitfinex.
With that transaction on Sept. 21, tether’s circulating market cap rose above $2.8 billion, reaching a new all-time high. In the month that followed, USDT’s circulating supply has plunged by 610 million units, reducing the number of outstanding tether tokens by a full 22 percent to just over 2.2 billion.
Tether’s market cap, however, currently stands somewhat lower, at $2.16 billion, owing to the fact that the token has consistently traded below its supposed $1.00 price point since Oct. 15.
Notably, the bulk of the outflows occurred either after or directly before USDT lost its USD peg, sending the token’s global average price as low as $0.92. Transactions on Oct. 3 and Oct. 9 removed a collectively $110 million from circulation, but the other $500 million was yanked from the market over a period of just three days, from Oct. 14 to Oct. 17, representing a 72-hour supply decrease of 19 percent.
There are a variety of potential explanations for this rapid increase in outflows. One is that large-scale USDT holders are beginning to swap their tokens out for the recently-launched “regulated” stablecoins from Paxos, Gemini, and Circle, either directly — on exchanges — or by redeeming them while concurrently depositing funds with the alternative token issuers. This would have been particularly attractive over the past several days, as all of these stablecoins have traded at a premium to both USDT and the physical greenback itself. However, while these tokens have experienced rapid market cap growth, their present valuations could only account for a portion of tether’s outflows.
Consequently, it’s likely is that cryptocurrency traders who are confident in their ability to complete fiat withdrawals from Bitfinex — which treats tether as USD but has also experienced high-profile banking woes— are taking advantage of the tether token’s discounted value to engage in arbitrage.
As of the time of writing, the tether price stood at $0.98, according to CoinMarketCap, though on individual exchanges such as Kraken the token continued to trade as low as $0.96 against physical USD.
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