Tether destroyed 500 million USDT on Wednesday in what many people consider an attempt to stabilize its price. The cryptocurrency redeemed and burned more than half of the circulating tokens, with officials maintaining almost 30% of the total supply.
Tether issues the USDT tokens. Each one is backed by a USD, although that will not necessarily mean that they are tradable through the Tether platform. It is stablecoin, meaning that it is designed to be always worth $1.
The announcement came via the company’s Twitter account prior to 1:00 p.m. ET on Wednesday. The 500 million USDT tokens that were burned were previously held in an account known as the Tether treasury. Recently, specifically in the past couple of weeks, that account was receiving vast amounts of USDT after last week, when Tether lost parity with the USD.
Is Tether Scaling Back on Purpose?
It goes without saying that Tether manages the treasury account, the same that starting from October 14th (the day in which each USDT began to be worth less than a dollar) and until October 23rd received almost 680 million USDT. The sender of the transfers was an address controlled by the crypto exchange Bitfinex, a related company to Tether in terms of ownership.
Some people within the industry assume that since Bitfinex’s cold wallet balance has dropped by nearly 100,000 BTC since the start of last month, the exchange platform has spent Bitcoin with the sole intention of taking Tether off the market by pushing the USDT price closer to the $1 threshold.
The aftermath of the transfers is the reduction of the supply of Tether in circulation by nearly a quarter and a half, and now the number is closer to $2 billion. Most of the tokens were “burned,” taken out of circulation or destroyed.
Tether also announced this week that all the USDT that were being held in the treasury account were not burned, as some of them were kept around in preparation for future USDT issuances. They maintained 466 million.
The Bitfinex Exchange denies any Relation with Dollar Parity Tactics
For its part, Bitfinex exchange denied, through the statements of its Director of Communications, Kasper Rasmussen, that the burned USDT event had anything to do with trying to earn back dollar parity because Bitfinex and Tether guarantee 1:1 redemption, effectively taking down the rumors of Tether trying to scale back its supply on purpose.
Rasmussen also reminded people that the Tether tokens are only redeemed when the amount of USDT circulating in the crypto market “exceeds the amount required for e.g. Bitfinex or Tether to operate.”
The executive also explained that since the Bitfinex exchange platform is one of the primary customers of Tether, the vast majority of the burned tokens came from its wallet.
Tether refers to the process of transferring USDT to the treasury account in its whitepaper, and names it “redemption.” The cryptocurrency clearly states that USDT holders have the ability to redeem their tokens for dollars directly with the company.
By Andrés Chávez