Tether creates one billion new tokens 🚀

Crypto News: Tether Creates One Billion USDT Tokens in Technical Operation

Yesterday, Tether created one billion new tokens of the USDT stablecoin in one go. However, these tokens were not immediately placed on the markets, as it was a technical operation aimed at “restocking inventory.”

The Inventory Supply of Tether’s Stablecoin

Tether’s CEO, Paolo Ardoino, revealed that the creation of one billion USDT tokens was a restocking of inventory.
Tether creates USDT tokens but generally does not distribute them directly to users who request them in exchange for USD.
Most USDT tokens are put on the market through exchanges, particularly Bitfinex.
Due to nearly depleted reserves, Tether created one billion new USDT tokens to add to its reserves in anticipation of increased demand on exchanges.
Exchanges obtain USDT by exchanging an equal amount of USD with Tether paying $1 each.

Market Capitalization Impact

Regardless of whether the newly created tokens have been distributed on the market or not, they have increased the total supply and impacted the market capitalization of USDT. The market capitalization jumped from 98.8 billion to 99.6 billion following the creation of one billion new tokens. The market capitalization has been on a constant rise since late February, increasing by 1.7% in just seven days.

The increase in USDT market capitalization follows a growth trend that began in mid-October.
The approval of new Bitcoin ETFs triggered a rise in USDT’s market cap from 96.2 billion to 99.6 billion within eight days.

Impact on Crypto Markets

Contrary to popular belief, the creation of new USDT does not lead to price increases in the crypto markets. Instead, it is the increase in prices on crypto markets that drives up demand for USDT, prompting Tether to create more tokens. The issuance of new USDT does not seem to have consequences on Bitcoin’s price; rather, it is driven by market movements and increased liquidity in stablecoins.

Tether releases USDT on crypto markets by withdrawing USD as all issued USDT are backed by equivalent dollar reserves.
The rise in USDT market capitalization correlates with upward movements in crypto markets since October 16.
An increase in cryptocurrency prices attracts fiat capital that is converted into stablecoins, boosting demand for stablecoins over fiat currencies.

Hot Take: Understanding Tether’s Role in Crypto Markets

In conclusion, while Tether’s creation of one billion USDT tokens may impact its market capitalization and liquidity in stablecoins, it is driven by market demand rather than directly influencing cryptocurrency prices. As an investor or observer in the crypto space, understanding these dynamics can provide insights into how stablecoins like USDT function within the broader ecosystem.