Alameda, associated with SBF, generated $38 billion in USDT through arbitrage trading, according to a Coinbase director.

Data from blockchain analysis by Coinbase director Conor Grogan reveals that Alameda Research redeemed more than $38 billion for Tether (USDT) tokens in 2021, despite not possessing the corresponding assets under management.

Onchain data indicates that Alameda was accountable for minting $39.55 billion of USDT, which constitutes 47% of Tether’s current circulating supply.
A prior report by Protoss estimated this figure to be approximately $36.7 billion; I was able to revise these numbers with additional wallets I discovered. pic.twitter.com/fYBvGAYlFd

— Conor (@jconorgrogan) October 9, 2023

Grogan asserts that the total value of USDT creation exceeded Alameda’s total assets recorded during the peak of the broader cryptocurrency market bull run in 2021.

He also indicates that the USDT redemptions ordered by FTX were likely sourced from Alameda’s tokens, amounting to 3.9 billion USDT. Most of this redemption occurred amid the collapse of the Terra Luna algorithmic stablecoin.

In January 2021, former Alameda co-CEO Sam Trabucco commented on ongoing reports of substantial USDT mints conducted by Tether and provided insights into how Alameda capitalized on arbitrage opportunities related to the value of USDT against various trading pairs across different exchanges.

By the way, to connect some dots here — many individuals seeking access to a coin like USDT *aren’t* doing so through creation. They often acquire it by purchasing in the markets — and they are buying a LOT, and VERY aggressively. https://t.co/pKRj3AMJ9D

— Sam Trabucco (@AlamedaTrabucco) January 11, 2021

Trabucco explained that the premium at which USDT trades relative to $1 was generally unstable, as Bitcoin to USDT trades typically resulted in a slight deficit in basis points compared to BTC/US dollar trades.

“And note, *these* are the best markets to use to determine where USDT is trading — the combination of BTC/USDT and BTC/USD markets, for example, 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 significantly more.”

He further elaborated that other US dollar stablecoins like USD Coin (USDC) exhibited less volatile premiums due to the creation and redemption mechanisms associated with USDT. Since select firms can create and redeem USDT, most market participants obtain and trade USDT directly from the markets rather than from Tether’s treasury:

“And when USDT rises above $1? A sophisticated firm like Alameda with excellent setups across all exchanges and bots to execute multiple legs simultaneously is going to want to sell! And we do — a LOT.”

Trabucco noted that Alameda was capable of “safely placing large bets” due to its ability to create and redeem USDT as needed. The former Alameda CEO characterized the scenario as a “win-win” for both the trading firm and the stability of USDT’s dollar peg:

“Clearly we’re profiting because we can, for instance, sell above where we create, but we’re also aligning the price so that when aggressive buyers enter, it remains close to $1.”

Consequently, Alameda benefited by capturing the premium on arbitrage opportunities through its capacity to create USDT tokens. Bankman-Fried also contributed to the discussion in 2021, asserting that Alameda actively redeemed USDT for US dollars.

It’s somewhat amusing to hear people claim that you can’t create/redeem USDT for $.
Like, I don’t know what to say, you can, and we do. https://t.co/8XthTsk1xr

— SBF (@SBF_FTX) January 12, 2021

Cointelegraph has reached out to Tether to verify the quantity of USDT tokens that were minted at the request of Alameda.

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