Massive USDT Minting by Tether: Liquidity Solution or Risk?
Tether minted 2 billion USDT on December 6, adding to its print inventory over the past few months. With latest move, top issuers by capital StablecoinSince November 6, the total amount of USDT issued has reached 19 billion.
These actions reflect Tether’s dominance in providing liquidity to the cryptocurrency market. Still, it raises concerns about transparency and systemic risks.
Tether minted $4 billion this week
Blockchain analytics tool Lookonchain reported that Tether minted $2 billion late in Friday’s U.S. trading session. This comes just one day after the stablecoin issuer printed $1 billion USDT Thursdayand another 1 billion USDT in the past two days, December 3.
“Tether minted another 2 billion USDT 6 hours ago! Since November 6th, Tether has minted $19 billion USDT on Ethereum and Tron.” report.
Minting involves effectively creating tokens Injecting liquidity into cryptocurrency markets. In theory, it helps facilitate smoother trading while enabling traders to hedge volatility. The addition of USDT could enhance liquidity, potentially stabilizing prices and narrowing spreads during periods of high trading volume.
With Bitcoin trading above $99,000 and experiencing high volatility, increased USDT liquidity could stabilize the market or exacerbate price volatility, depending on its deployment.
However, the huge scale of the total minting of 19 billion coins in the past month has triggered speculation. While Tether’s ability to quickly meet liquidity needs is a testament to its utility, it also raises questions about the potential for oversupply if not managed effectively.
Transparency issues and support debate
The crypto community has expressed concerns over whether Tether’s minting is consistent with adequate reserves. Critics argue that over-minting without full transparency could damage market confidence, especially if Tether cannot confirm its reserves.
“Trustless systems thrive on transparency. Too much unclear minting creates uncertainty, like bad coffee.” A user on X joke.
This isn’t the first time this topic has come up. Tether CEO Paolo Ardoino has addressed these issues in the past, emphasize It is the strong backing of the company’s focus.
He said stablecoins should be maintained in reserves primarily in highly safe assets such as U.S. Treasury bills to mitigate the risk of uninsured cash deposits. Ardoino also mentioned ongoing discussions with regulators to establish a framework to ensure the safety of stablecoin operations.
“Stablecoins should be able to keep 100% of their reserves in Treasury securities, rather than keeping large reserves in uninsured cash deposits and thereby exposing themselves to the risk of a bank failure. If the bank fails, the securities will be returned to legitimate owners “Ardoino” Wrote.
Nonetheless, recent mints highlight Tether’s strategy for optimizing liquidity. For example, a large portion of USDT was reallocated from less active blockchains to Ethereum to meet the network’s growing demand.
Such adjustments help maintain Tether’s role as a major source of liquidity in centralized and decentralized markets, where the stablecoin accounts for approximately 85% of daily trading activity.
Despite these benefits, the minting boom also changed liquidity dynamics. Smaller blockchains may face reduced activity Tether Supply consolidation elsewhere. Additionally, an increase in the supply of USDT on Ethereum may lead to increased network congestion, thereby increasing transaction costs during peak trading periods.
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