SBF’s Alameda raised $38B USDT to profit from arbitrage trading: Coinbase director
According to blockchain data suggested by Coinbase Director Connor Grogan, Alameda Research for Tether (USDT) tokens in 2016. Despite having no equivalent assets under management, it has redeemed more than $38 billion by 2021.
Onchain data shows that Alameda was responsible for processing $39.55B USDT, a number that is 47% of Tether's circulation today.
An earlier report by Protoss estimated the number at around $36.7B; I was able to update these numbers with more wallets I found pic.twitter.com/fYBvGAYlFd
— Conor (@jconorgrogan) October 9, 2023
According to Grogan, the total value of USDT creation in 2021 at the height of the broader cryptocurrency market bull run was greater than the total assets Alameda held on its books.
Grogan suggests that USDT redemptions ordered by FTX may have come from Alameda tokens, totaling 3.9 billion USDT. Most of this redemption volume took place during the collapse of the Tera Algorithm stablecoin.
In January 2021, former Alameda CEO Sam Trabuco weighed in on important USDT mint reports performed by Tether and provided insider insight into how Alameda gained arbitrage opportunities on various trades related to the value of USDT.
BTW, to connect some points here — most people who want to get a coin like USDT don't do it through creation. They usually do this by just buying in the markets — and they're buying a lot and really, really hard. https://t.co/pKRj3AMJ9D
— Sam Trabucco (@AlamedaTrabucco) January 11, 2021
Trabuco noted that Bitcoin (BTC)-to-USDT trades resulted in a slight deficit in basis points compared to BTC/USD trades, noting how the USDT to $1 premium was typically volatile.
“And note, *these* are the best markets to know where to trade USDT – the combined BTC/USDT and BTC/USD markets, for example, are more liquid than any exchange's USDT/USD market, so the price is higher than these (even if it's a two-legged trade). are more important.
Trabuco went on to explain that other United States dollar stablecoins such as the USD Coin (USDC) had a less volatile premium in the creation and redemption process relative to USDT. Because select organizations have the ability to create and buy USDT, most market players buy USDT from their own markets, not directly from the Tether Treasury.
“And when USDT gets over $1? A sophisticated company like Alameda is well-prepared to execute more than one leg at a time on all exchanges and bots they want to sell! And we do – a lot.
Trabuco added that Alameda was able to “place a big bet” on USDT's ability to make creations and redemptions when needed. The former Alameda CEO described it as a “win-win” situation for the business and the stabilization of USDT's dollar peg.
“We're actually making money, for example, because we can sell more than what we've created, bringing the price in line, so when agro buyers come in, it's close to $1.”
As a result, Alameda has profited by creating USDT tokens and collecting arbitrage opportunities. Sam Bankman-Fried himself melted into the debate in 2021, stating that Alameda redeemed USDT for US dollars.
It's ridiculous when people say you can't create/redeem USDT with $.
Like, I don't know what to tell you, you can, and we will. https://t.co/8XthTsk1xr
— SBF (@SBF_FTX) January 12, 2021
Cointelegraph has acquired Tether to verify the amount of USDT tokens produced at Alameda's request.
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