What Does Make Bitfinex Buy Massive Amounts of USDT?


Bitfinex buys massive quantities of Tether tokens out of circulation. What seems to be the reason that pushed the cryptocurrency exchange to make this move? 

23 October 2018 – Reportedly, Bitfinex, one of the global cryptocurrency exchanges, is now sending massive amounts of Tether tokens back to the vaults. 

Is Tether going out of stablecoin business?

This crypto exchange has overlapping owners with Tether Ltd. The latter is the company that is responsible for the issuance of the USD-linked cryptocurrency Tether, which has the abbreviation USDT.

Both the firms have appeared under the increased scrutiny after the USDT’s drastic break with dollar parity earlier last week. That time, the exchange rate has shortly fallen to $0.85 on the Kraken exchange. 

Noteworthy, a wallet address that is controlled by Bitfinex has sent 630 million USDT to an address that is known as the “Tether treasury.” The amount of tether tokens has been sent over six large transactions during the recent days. The first transaction of 200 million USDT, was sent on 14th October. Following this, the token’s price started to regain its peg to the US dollar. The following 230 million USDT was sent over the next three days. 

These transactions managed to remove a massive part of USDT from the global circulation. According to some of the online reports, it is still unclear why Bitfinex is removing Tether’s supply of the market. Some of the reports suggest that Tether is getting out of the stablecoin business, thus buying back its own tokens at a profit. 

This theory was suggested by one of the researchers going under the name “Hasu” and the CEO of the Singapore-based fund manager Three Arrows Capital, Su Zhu. 

Can Tether holders redeem USDT for USD?

As per the Tether’s white paper, holders of this token are able to “redeem” USDT for the US dollars. Dollars are held in a bank at a one-to-one ratio with the USDT tokens in circulation. In reality, there is not much of an evidence that people are able to do this. Reportedly, some of the token holders have complained that getting fiat currency from the company is not possible. 

According to Hasu and Zhu’s statement, Tether is redeeming the tokens from itself. They are buying these coins at a discount on the market and transforming the US dollar collateral from a liability to an asset. Hasu has been quoted as saying:

“Anyone could make money by arbitraging the USDT spread (the price at which it trades for on exchanges. It would make sense that Tether itself would be participating in these buybacks.”

In fact, a Chinese over-the-counter (OTC) cryptocurrency trader and Bitfinex shareholder, Dong Zhang, stated that he “actually made money” from USDT arbitrage since the parity broke.

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