On Wednesday, Tether announced via Twitter that they have destroyed 500 million USDT tokens. USDT is a stablecoin. It has been designed as a token that is backed by the US dollar. Because of this, it is said to be less volatile than cryptocurrencies.
The tokens were held in an account that is known as “Tether treasury”. It was reported in the past few weeks that massive influxes of USDT went into the treasury after Tether dropped momentarily below 90 cents.
It was recorded that USDT started to lose value and slip below $1 from October 14 to October 23. And because of this, approximately 680 million USDT were transferred to the company’s treasury wallet.
Controversy on Tether
There were speculations in the past that Tether has been used in order to manipulate the price of Bitcoin. In addition to this, there are also those who claim that Tether doesn’t have enough US dollar to back the value of its stablecoin.
Since early September, Bitfinex’s cold wallet discarded around 100,000 bitcoins. It has led some people to speculate that the exchange has been spending Bitcoin to get rid of Tether off the market. Perhaps, this has been seen as a method that could push the price of the cryptocurrency back towards $1. For some, they are even speculating that the stablecoin will be taken out completely.
The result of this is that the supply of Tether has dropped to around $2 billion in just a week and a half. In addition to this, there were those that have been taken out of circulation completely by the company. For Kasper Rasumussen who works as Bitfinex’s director of communications, he said that this “does not have anything to do with defending dollar parity”. He also denied that Tether is pulling the supply back.
He said that these tokens are redeemed “when the amount circulating exceeds the amount required for e.g. Bitfinex or Tether to operate”. He added that “Bitfinex is one of the main customers of Tether” and the destroyed tokens came from Bitfinex’s wallet.
A Need for Stablecoins?
Is there really a need for stablecoins? If you will look at the price movement of Bitcoin in the last month, it has become less and less volatile. And in fact, it is said to be less volatile than Netflix shares. Could this be due to the market maturing? Or could it be because of the anticipation of the market that they are waiting for another bull run?
Adoption is still something that hasn’t been achieved by cryptocurrencies at this point. Though there are businesses that are slowly accepting cryptos, the work is quite far from over. Solving volatility is something that can pave way towards adoption. However, is a stablecoin really the answer to this?
Mike Novogratz think that USDT should be more transparent when it comes to its operations. He thinks that “Tether didn’t do a great job in terms of creating transparency”. He also added that the concept of a stablecoin is something that makes sense considering the current volatility of cryptocurrencies. In fact, there are also other stablecoins such as the one that was made by Circle that is now available in Coinbase’s crypto exchange.