Crypto news: yesterday, Tether created one billion new tokens of the USDT stablecoin in one go.
However, they were not immediately placed on the markets, as it was a technical operation aimed at “restocking inventory”.
Crypto news: The inventory supply of the stablecoin Tether $USDT
It was Tether’s CEO, Paolo Ardoino, who revealed that it was a restocking of inventory.
Tether indeed creates the USDT tokens, but generally does not distribute them. It is rare for someone to directly request Tether to send them USDT tokens in exchange for US dollars (USD).
Most USDT tokens are put on the market through exchanges, in particular Bitfinex.
Since Tether had almost depleted its USDT reserves, and anticipating an increase in demand on exchanges, yesterday it created one billion new USDT tokens to add to its reserves, in order to be ready to give them to exchanges if requested.
It should be remembered that exchanges can also obtain USDT only by exchanging an equal amount of USD, in other words they have to buy them from Tether paying $1 each.
It should also be specified that it is not the exchanges that purchase them on their own behalf, but on behalf of their clients. When many clients of an exchange want to buy USDT paying in USD, the exchange can in turn get them from Tether.
It is rare that users themselves directly ask Tether to purchase USDT by paying in USD: usually there are exchanges as intermediaries.
The most important exchange from this point of view is Bitfinex, which is part of the same corporate group as Tether.
Market capitalization
It is a fact, however, that regardless of whether that billion new tokens have already been distributed on the market or not, they have been created, increasing the total supply.
This caused crypto price aggregators to immediately start counting them in the calculation of USDT market capitalization. And so, the day before yesterday it suddenly jumped from 98.8 billion to 99.2, then rising again today first to 99.4 and then to 99.6.
It has been since late February that the market capitalization of USDT has been growing almost constantly, going from 97.9 to 99.6 billion dollars, with an increase of 1.7% in just seven days.
Just saying that in the ten days before it had remained almost stable, and this makes it clear that from February 26th a new phase of growth in the crypto markets driven by demand has been triggered.
At the beginning of 2024 USDT had a market capitalization of 96.2 billion, but starting from the day before the approval of the new Bitcoin ETFs it had started to rise, then recording a +1.7% increase in eight days.
Actually, this growth trend, interrupted only momentarily between the end of January and the beginning of February, had started shortly after mid-October, when the market capitalization of USDT went from 83 to 85 billion dollars in a couple of weeks.
Thanks to the rally of the crypto markets, and in particular of Bitcoin, at the end of 2023, the market cap of USDT rose even further to 90.8 billion by mid-December.
The impact on markets
Many suspect that the creation of new USDT leads to price increases in the crypto markets.
Actually, it’s the opposite: it’s the increase in prices on the crypto markets that produces an increase in demand for USDT, to which Tether reacts by creating more.
It should not be forgotten that Tether releases USDT on the crypto markets only by effectively withdrawing USD, because all USDT issued so far are backed by equivalent dollar reserves of equal or even greater value.
Indeed, the rise in USDT market capitalization in recent months began on October 16, while the crypto markets had already started moving upwards the day before.
Even the following movement started on November 23rd in the crypto markets, while only three days later for the USDT capitalization.
Another important movement Bitcoin made between January 1st and 2nd, 2024, while USDT market capitalization then rose mainly starting from January 3rd.
Therefore, the issuance of new USDT does not seem to have consequences on the price of Bitcoin, but it seems to be the opposite. The real impact of USDT on crypto markets is the increase in liquidity in stablecoins, since the latter are more used than fiat currencies in these markets.
In other words, the increase in cryptocurrency prices attracts new fiat capital, a portion of which is almost immediately converted into stablecoins, thus increasing the demand for stablecoins themselves.