SBF leverages Alameda to mint $38 billion in USDT to profit from arbitrage trades

Data on this site tagged by Coinbase Director Conor Grogan indicates that Alameda Research redeemed more than $38 billion in Tether for Tether, which will still issue tokens in 2021 despite not having equivalent assets under management.

Grogan said that at the peak of the cryptocurrency market bull run in 2021, the total value created by USDT was higher than Alameda’s total book assets. The USDT redemptions ordered by FTX are likely to come from Alameda’s tokens, totaling 3.9 billion USDT. Most of the redemption amounts were made during the collapse of the Terra algorithmic stablecoin.

In January 2021, former Alameda co-CEO Sam Trabucco commented on popular reports of Tether minting large amounts of USDT and provided how Alameda was arbitraging opportunities related to the USDT value of various trading pairs on different exchanges. Insider insights to profit.

Trabucco describes how premiums for USDT trading to $1 typically fluctuate, as Bitcoin-to-USDT trading results in a slight base point deficit compared to BTC/USD trading.

Trabucco went on to explain: Please note that theseare the best markets for determining where to trade USDT - for example, the combination of BTC/USDT and BTC/USD markets is more liquid than the USDT/USD market on any exchange Sex, so from these (even a two-legged deal) is more important. , other US dollar stablecoins, such as USDC, have smaller premium fluctuations due to the creation and redemption process involved in USDT. Given the ability of specific companies to create and redeem USDT, most market participants acquire and trade USDT from the market itself rather than directly from Tether’s vaults.

When USDT rises above $1? An established company like Alameda, with a great setup on all exchanges and bots that can execute multiple branches at once, will want to sell! We do – a lot. Alameda is able to make large stakes safely because of its ability to create and redeem USDT when needed. The former CEO of Alameda described it as a win-win situation for the trading company and USDT USD peg stability:

Obviously we are making money because we can sell at a higher price than we create, but we are also keeping the price consistent, So that when aggressive buyers come in, the price will stay close to $1.

Thus, Alameda profits from the ability to create USDT tokens by charging a premium for arbitrage opportunities. Sam Bankman-Fried himself has chimed in on the 2021 debate, stating that Alameda actively converts USDT into USD.

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