Alameda’s multi-billion USDT issuance raises questions.
Data from blockchain analysis highlighted by Conor Grogan, a director at Coinbase, suggests that Alameda Research issued more than $38 billion in Tether (USDT) tokens during 2021.
Interestingly, this amount surpasses the total assets under management that Alameda reported during the peak of the cryptocurrency bull market last year.
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He further indicated that out of these Tether issuances, a sum of 3.9 billion USDT was likely ordered for redemption by FTX. Notably, most of this activity occurred during the downfall of Terra's algorithmic stablecoin.
Sam Trabucco, the former co-CEO of Alameda, had previously shed light on how the firm capitalized on arbitrage prospects tied to the USDT value across diverse trading pairs on various crypto exchanges. Trabucco elaborated that the volatility in the premium at which USDT trades compared to the US dollar was generally higher.
This is particularly visible in Bitcoin to USDT trades, which often result in minor basis point deficits compared to BTC/USD trades. Trabucco noted:
The combo of BTC/USDT and BTC/USD markets are WAY more liquid than any exchange’s USDT/USD market, so the prices from these (even though its a two-leg trade) matter way more.
He also explained that other stablecoins pegged to the US dollar, like USD Coin, had a less volatile premium. This was attributed to the unique creation and redemption mechanics surrounding USDT.
Given Alameda's resources and setups, Trabucco stated that the firm was ideally positioned to sell USDT when its price went above $1. He referred to this as a "win-win" situation, benefiting both Alameda's profitability and the stability of USDT's peg to the dollar.
Concluding his thoughts, Trabucco said Alameda had the advantage of making large bets securely due to its ability to create and redeem USDT whenever necessary.
Sam Bankman-Fried also contributed to the discussion last year by confirming that Alameda was actively redeeming USDT for US dollars. He was open about this in his own tweets:
Alameda Research seems to have leveraged its position and mechanisms in the Tether market to generate significant profits through arbitrage, according to details flagged by Coinbase’s Conor Grogan. If these findings hold up, they could raise further questions about the operations and transparency of major players in the cryptocurrency stablecoin market.
