On Wednesday, October 24, 2018, Tether Limited, the company which has issued the stable cryptocurrency Tether (USDT) made a public announcement via the social networking site, Twitter that it has successfully destroyed over 500 million Tether or USDT tokens. These tokens were earlier stored in an account that was known as ‘Tether Treasury’.
Ever since the stablecoin lost its parity with the United States Dollar, speculations have been on the rife about Tether’s access to banking services. As a consequence, the crypto world witnessed a huge influx of the Tether coin to the Tether Treasury wallet during the past few weeks. USDT started to fall below the range of USD 1 on October 14, 2018. This was followed by an inflow of about 680 million of the Tether stablecoin to the Tether Limited controlled Treasury wallet on October 23, 2018.
It is interesting to note that all the above transfers were conducted from the Bitfinex controlled address. The ownership as well as the management of the Hong Kong-based crypto exchange, Bitfinex, overlaps with that of Tether Limited.
Notably, speculations are rife that Bitfinex has been spending Bitcoin in an effort to take USDT off the market. This talk was stirred by the rumour mill after it was noticed that the cold wallet of Bitfinex lost as much as 100,000 Bitcoin since September 2018. The only reason behind this action can be explained by a potential move to push the exchange rate of USDT back to USD 1. Another conjecture is that perhaps the move was made by Tether to exit the stablecoin business in its entirety.
The above mentioned transfers have led to a decrease in the supply of USDT in circulation. As per news reports, the stablecoin in circulation has dropped by almost a quarter in 11 days time, and currently stands at USD 2 Billion. Most of the tokens that are out of circulation have been burned by Tether Limited.
The Director of Communications at Bitfinex, Kasper Rasmussen, has stated that they are not defending USDT’s parity with the US Dollar with the transfers ‘because both the exchange and the stablecoin guarantee 1-for-1 redemptions’. Rasmussen also reiterated the fact that ‘there is no conscious move to scale back the supply of Tether’.
Rasmussen also highlighted the fact that the only reason why most of the destroyed Tether came from the wallet of the crypto exchange Bitfinex is that Bitfinex happens to be one of Tether’s primary customers. He stated that Tether are redeemed whenever the number of coins circulating in the market exceeds the amount required for Tether to function.
Tether’s Wednesday’s announcement also stated very clearly that not all of the stablecoins were burnt. The company sources mentioned that as much as 466 million USDT still remain stored in the company’s Treasury wallet. This storage is maintained as a measure for future cases where the issuance of Tether may be necessary.