After sending around 680 million USDT coins to the “Tether Treasury,” the company behind the cryptocurrency tether has destroyed 500 million USDTs. What is the reasoning behind this action?
25 October, 2018 – The company behind the USD-linked stablecoin Tether announced via Twitter that it has destroyed 500 million tether (USDT) tokens.
Bitfinex Sent Massive Amounts of Tether to “Tether Treasury”
Earlier this week, AtoZ Markets reported that Tether has been sending 680 million USDT to the company-controlled Treasury wallet. The account is known as the “Tether treasury.” The past few weeks seen massive influxes of USDT to the Treasury, after the cryptocurrency lost parity with the US dollar last week when then Tether’s access to banking services has been questioned.
Starting from October 14, when the USDT stated to drop below $1.00 and to October 23, a total of 680 million USDT were sent to Tether’s Treasury wallet. All of these transfers emerged from an address controlled by Bitfinex, which is a cryptocurrency exchange has common ownership with Tether.
Bitfinex’s cold wallet’s balance has dropped by approximately 100,000 Bitcoin since early September. This caused some of the market participants to speculate that the exchange has been spending Bitcoin in order to take tether off the market. Some suggested that this was intended to push the exchange rate back towards the $1.00 market or to exit the stablecoin market as a whole.
As a consequence of these transfers, the supply of tethers has slipped by around 15% in a week and a half to around $2 billion. In the latest developments, the majority of these tokens have been “burned” by the company.
Why did Tether Burn USDT coins?
Bitfinex’s director of communications, Kasper Rasmussen, stated that the action “does not have anything to do with defending dollar parity.” Both the exchange and Tether guarantee one-for-one redemptions. He denied that Tether is purportedly scaling back the supply of USDT.
Tether tokens are redeemed “when the amount circulating exceeds the amount required for e.g. Bitfinex or Tether to operate,” according to Rasmussen. The reason that most of the destroyed tokens emerged from Bitfinex’s wallet is that “Bitfinex is one of the main customers of Tether.”
In its announcement, Tether stated that it did not burn all of the USDT in the Treasury account. It is understood that around 466 million USDT still remain in the account “as a preparatory measure for future USDT issuances.”
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