Tether’s Ethereum network assets have risen by USD 1 billion this month. With this, its USDT balances on crypto exchanges stand at 20.339 billion as of August 13, 2024.
This seems to imply that investors are getting ready to plow their stablecoins into crypto assets as anticipation builds toward the U.S. Fed’s September rates announcement.
Earlier in July, the Financial Times reported that the FED is likely to lower interest rates in its forthcoming decision.
Tether’s Ethereum transaction significantly bolsters its circulating supply and it’s just one of the strategies the company employs to influence liquidity in the crypto market.
The Logic Behind Tether’s Latest Strategy
In the aftermath of Tether’s new policy, Tether CEO Paolo Ardoino made further clarification about the transaction on X.
According to him, the increased minting is meant to serve as an Ethereum Network “inventory replenish” while revealing that the transaction was “authorized but not issued.” In simpler terms, this means that the tokens are stored to cater to future issuance requests and chain swaps.
In finance, replenishment of inventory has to do with placing new stock orders to satisfy demand while simultaneously guarding against overstocking. Hence, Tether’s creation of USDT is meant to ensure enough reserves.
These reserves are held in its treasury till there is a need for them. This strategy helps promote efficient management of liquidity while guarding against immediate release into circulation.
According to data from the company’s Transparency page as of August 14, USD 941.72 million in USDT are presently “authorized but not issued” on Ethereum.
This implies that nearly 60 million USDT from the above-mentioned USD 1 billion mints are already in circulation, an indication of strong demand.
If the Fed decides to lower interest rates as expected by the CME and other analysts, there could be increased optimism in the industry.
Markus Thielen, lead researcher at 10x Research notes that almost USD 2.8 billion was issued by Tether and Circle last week, meaning that institutional investors are injecting new capital into the crypto market.
According to him, a continuation of this trend of issuance, as opposed to just minting, could see BTC make further gains.
Tether is Facing a Legal Battle
Tether’s latest policy is coming at a time when the company says it will commence procedures to defend itself from a “shakedown” litigation instituted against it by Celsius, a crypto lender that is now bankrupt.
Last week, Celsius approached a U.S. Bankruptcy Court located in New York’s Southern District to mandate Tether to give up 57,428.64 BTC or in the alternative, to award the “present value of all Bitcoin,” (about USD 3.3 billion in current rates).
The case revolves around a loan deal between Tether and Celsius that empowered the latter to borrow stablecoins in other to operate some critical areas of its business.
Other Notable Tether Initiatives
Tether is helping efforts at a decentralized ecosystem encompassing day-to-day consumer services.
A notable project the company is involved in in this direction is known as Pear Credit. Pear Credit is a transparent accounting mechanism based on peer-to-peer technology.
Tether has also committed its resources to GenAI cloud platforms, a clear indication of its interest in stimulating technological innovation. USDT is the largest stablecoin in the world by market capitalization.
