A 500 million token Tether burn has been undertaken over the past week by Tether Ltd, as investors flee the besieged stablecoin in the face of mounting concerns over USDT and the emergence of more transparent alternatives.
The Stable, the Stable, the Stable’s on Fire…
In the past week, Tether Ltd has burned 500 million USDT tokens from its Treasury Wallet to take them out of circulation. The company announced on October 24th it had destroyed half a billion dollars worth of Tether over the past week:
The burn caps off a month of Tether redemptions totaling around 800 million, as investors fled the embattled stablecoin for bitcoin, fiat, and transparent alternative stablecoins USDC, the Gemini dollar, and Paxos.
Flight From Doubt Shook USDT Out
The burn doesn’t necessarily indicate wrongdoing on Tether or Bitfinex’s part. Some have argued that, at the prevailing average price this week of 96 cents, the company has bought the tokens at a four percent discount to their supposed value of $1 USD. Another, more innocent, explanation is the sensible and obvious removal of Tether from the market as redemptions into fiat or other cryptos sped up.
With 466 million tokens remaining in the Treasury Wallet, the company remains prepared for any future demand for Tether to be issued:
“Over the course of the past week, Tether has redeemed a significant amount of USDT from the circulating supply of tokens. In line with this, Tether will destroy 500m USDT from the Tether treasury wallet and will leave the remaining USDT (approx 466m) in the wallet as a preparatory measures for future USDT issuances.”
Tether Burn Indicates a Risk-Off Approach as Fears of a Collapse Mounted
The flight from Tether this month followed Bitfinex’s banking woes, which saw it hop from the failing Noble Bank International, to HSBC via the affiliated Global Trading Solutions, and then onto the Bank of Communications, operating through the account of another affiliate, Prosperity Revenue Merchandising Limited. Ironically, HSBC has a roughly 20 percent stake in the Bank of Communications.
… And Then Came the Alternatives
With Circle’s USDC, the Gemini dollar, and Paxos all submitting to independent attestations, Tether faced increasing competition from more trusted fiat-backed cryptos. Coinbase announced the listing of USDC only this week.
The Much Feared Bitcoin Plunge That Failed to Eventuate
As Tether dipped to as low as 87 cents per CoinBillboard on October 15th, the Gemini dollar surged at one point to $1.18. The much-hyped link between Tether issuance and the bitcoin price surge of 2017 appears to have been broken. Many regarded the surge in Tether supply as not fully backed by fiat and potentially cataclysmic to bitcoin in particular and the entire cryptocurrency market overall.
Events over the past week have proven bitcoin to be more resilient and a safe haven asset of choice amid the chaos of perceived risk.
Have your say. Given the recent Tether burn, is the cryptocurrency market healthier in the long run?
Images via Pixabay
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