Unwanted Tether (USDT) Leaves Markets through Bitfinex

As the USDT asset still trades below the dollar, the flow to Bitfinex and Tether attempts to control the situation by retiring the coins.

The Tether company has embarked on crisis management of sorts by retiring more USDT to the storage wallet, thus decreasing the number of coins in circulation. While new USDT were minted and added to the supply in the past months, now the treasury is mopping up the unwanted coins, with the wallet absorbing 250 million USDT on Tuesday.

As of October 16, the Tether Treasury holds 736,678,763 USDT, second only to Binance with around 760 million USDT. In the past days, the refilling of the treasury follows a distinct pattern - USDT coins landed on Bitfinex and were then sent from the exchange wallet back into the custody of Tether. Thus, the organization is decreasing the outstanding coins and its liabilities.

The Bitfinex USDT wallet had been close to empty, holding just over 52 million units, but in the past day, it contained upward of 231 million coins. At the same time, more Bitcoins are leaving the exchange, with another 3,000 BTC withdrawn on October 16.

USDT still hovers around $0.95 on Kraken, and more coins flow to the exchange, with 45 million coins stored in its wallet, potentially awaiting a sale. This may further undermine trust in USDT, which at one point fell as low as $0.85.

The Bitfinex premium on Bitcoin still exists as the asset trades at $6,762 as opposed to around $6,500 on other exchanges. In the past days, however, the Bitfinex share of Bitcoin dollar-like volumes shrank from 45% to 27%. This may be a sign of traders avoiding the exchange despite the price premiums.

At the same time, USDT trading accounts for more than 21% of volumes in the entire crypto market, as well as more than 52% of BTC trading, according to CryptoCompare data. This shows that even with a diminished supply, the USDT coin is highly important. It is difficult to tell if more USDT would be mopped up from the market or where this move would lead Bitcoin prices. Additionally, moving all USDT from the exchanges that hold them is difficult since there are still more than 2.25 billion units in circulation.

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