Massive USDT Mining on Tether: Liquid Solution or Risk?

Tether has added $2 billion in stock on December 6. In the latest move, the highly capitalized stablecoin issuer USDT has discontinued a series of mints totaling 19 billion since November 6.

These actions reflect Tether's dominance in providing liquidity to the crypto market. However, transparency and procedural concerns have raised concerns.

Tether Mints 4 billion USDT this week

Blockchain analysis tool Lookonchain reported that Tether had allocated $2 billion in the closing hours of the US session on Friday. This comes a day after the stablecoin issuer printed 1 billion USDT on Thursday and 1 billion USD two days earlier on December 3rd.

“Teter re-found $2 billion 6 hours ago! Tether has spent $19 billion on Ethereum and Tron since November 6, Lookonchain reports.

Mining involves creating tokens, effectively injecting liquidity into the crypto market. In theory, it helps facilitate simpler transactions while allowing traders to hedge against volatility. An increase in the USDT can improve inflation, while it can reduce inflation in times of high transaction volume.

With Bitcoin trading above $99,000 and experiencing high volatility, USDT liquidity can stabilize markets or exacerbate price volatility, depending on the deployment.

However, the recent drop in volume totaled 19 billion in one month, prompting speculation. While Tether's ability to meet liquidity needs makes its use faster, it raises questions about oversupply if not managed effectively.

Transparency concerns and supporting arguments

The crypto community has voiced concerns that the creation of Tether is not being matched with sufficient reserves. Critics argue that excessive liquidity without full transparency could undermine market confidence, especially if Tether cannot prove its assets.

“Untrustworthy systems thrive on transparency. Without clarity, over-examination can lead to doubts like bad coffee,” said one user on X.

This is not the first time this issue has been raised. In the past, the CEO of Tether, Paolo Arduino, emphasized the company's focus on strong support.

He noted that stablecoins should be held in highly secure assets such as US Treasury bills to protect against risks from uninsured cash deposits. Arduino mentioned ongoing discussions with regulators to establish frameworks that would ensure stable coin operations.

“Stablecoins should be able to keep 100% of their reserves in treasury accounts instead of exposing themselves to bank failures by placing large reserves in uninsured cash deposits. In the event of a bank failure, the securities will be returned to the rightful owner,” Arduino wrote.

However, the latest mints highlight strategies to facilitate Tether's liquidity. For example, a large portion of USDT has been transferred from non-active blockchains to Ethereum, meeting the high demand on this network.

Such adjustments help to maintain Tether's role as a primary source of liquidity in centralized and decentralized markets, which provide a stable coin from day-to-day trading activity. 85% is estimated.

Despite these advantages, the process also changes fluid dynamics. As the supply of USDT tightens elsewhere, activity on smaller blockchains may slow down. In addition, the increased supply of USDT on Ethereum may lead to network congestion, increasing transaction costs during peak trading periods.