Thursday, 30 November 2023

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SBF’s Alameda minted $38B USDT to profit off arbitrage trading: Coinbase director

SBF's Alameda minted $38B USDT to profit off arbitrage trading: Coinbase director

Blockchain data flagged by Coinbase director Conor Grogan indicates that Alameda Research redeemed over $38 billion for Tether (USDT) tokens in 2021 despite not having the equivalent assets under management.

According to Grogan, the total value of USDT creation was higher than Alameda’s total assets on its books at the height of the wider cryptocurrency market bull run in 2021.

Grogan also suggests that FTX ordered USDT redemptions were likely to have been from Alameda’s tokens, totalling 3.9 billion USDT. The majority of this redemption amount was carried out during the collapse of the Terra Luna algorithmic stablecoin.

In Jan. 2021, former Alameda co-CEO Sam Trabucco weighed in on prevailing reports of significant USDT mints carried out by Tether and gave inside insights into how Alameda profited off arbitrage opportunities relating to the value of USDT to various trading pairs across different exchanges.

Trabucco described how the premium in which USDT trades to $1 was typically volatile given that Bitcoin to USDT trades resulted in a slight deficit in basis points when compared to BTC/US dollar trades.

“And note, *these* are the best markets to use to determine where USDT is trading — the combo of BTC/USDT and BTC/USD markets, e.g., are WAY more liquid than any exchange’s USDT/USD market, so the prices from these (even though it’s a two-leg trade) matter way more.”

Trabucco went on to explain that other US dollar stablecoins like USD Coin (USDC) had a less volatile premia due to the creation and redemption process involved for USDT. Given that select firms have the ability to create and redeem USDT, most market players acquire and trade USDT from markets themselves and not directly from Tether’s treasury:

“And when USDT gets above $1? A sophisticated firm like Alameda with great setups on all the…

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