Today, Conor Grogan, a director at Coinbase, shed light on the actions of Alameda Research in relation to the Tether (USDT) stablecoin. This article will explore the concerns raised by Grogan, as well as the implications for the broader cryptocurrency market.
Alameda Research’s USDT Minting
According to blockchain data analyzed by Grogan, Alameda Research minted an astonishing $39.55 billion in USDT throughout 2021, despite not having the equivalent assets under management. This raises questions about the principles of stablecoins being backed by equivalent assets.
“The sheer scale of USDT minted by Alameda Research is a cause for concern,” said Grogan. “Especially considering that the value of the created USDT exceeded the firm’s total assets during the cryptocurrency bull run in 2021.”
This practice seems to contradict the fundamental idea of stablecoins being backed by equivalent assets, which has important implications for the stability of USDT and the overall trust in the cryptocurrency market.
The Relationship with FTX Exchange
Sam Bankman-Fried’s FTX exchange is closely associated with Alameda Research, leading to further scrutiny of the USDT minting. Grogan suggested that a significant portion of USDT redemptions ordered by FTX may have been sourced from Alameda’s minted tokens.
“Approximately $3.9 billion USDT was redeemed, with much of it happening during the collapse of Terra’s algorithmic stablecoin,” Grogan explained.
Insights from Former Co-CEO
In January 2021, Sam Trabucco, former co-CEO of Alameda Research, provided insights into how the firm capitalized on arbitrage opportunities related to USDT.
“The value of USDT compared to $1 could be volatile, particularly in Bitcoin-to-USDT trades,” Trabucco tweeted. “The combo of BTC/USDT and BTC/USD markets, for example, are way more liquid than any exchange’s USDT/USD market, so the prices from these matter way more.”
Trabucco further explained that Alameda Research had the capability to “safely put on big bets” due to its ability to mint and redeem USDT as needed. He described it as a “win-win” situation for both Alameda and the stability of USDT.
Implications for USDT’s Stability
Grogan’s revelation adds another layer to the ongoing debate about the true stability of USDT. Sam Bankman-Fried also participated in discussions in 2021, stating that Alameda actively redeemed USDT for U.S. dollars.
“Alameda’s ability to influence USDT’s dollar peg through arbitrage opportunities has implications for the broader crypto market,” Grogan pointed out.
Trabucco also emphasized the company’s role in stabilizing USDT’s value by stating, “Obviously, we’re making money because we can sell above where we create, but we’re also bringing the price in line so that when aggressive buyers come in, it sticks close to $1.”
Conor Grogan’s disclosure about Alameda Research’s extensive involvement in minting USDT raises concerns about the stablecoin’s backing and stability. This new information may prompt market participants and regulators to reassess the mechanisms behind the value of USDT.
