Market uptrend, Tether quickly issued 19 billion USDT in one month

Tether (USDT) issued 2 billion USDT on 06/12, adding to its reserves over the past few months. With this latest move, the issuer of the largest stablecoin, USDT, has completed a series of issuances totaling 19 billion since 06/11.

These actions reflect Tether's dominance in providing liquidity to the cryptocurrency market. However, this has raised concerns about transparency and systemic risk.

Tether issued 4 billion USDT this week

Blockchain analytics tool Lookonchain reported that Tether issued 2 billion USDT at the end of the US trading session on Friday. This came just a day after the stablecoin issuer issued 1 billion USDT on Thursday, and another 1 billion USDT two days earlier, on December 3.

"Tether just issued another 2 billion USDT 6 hours ago! Tether has issued 19 billion USDT on Ethereum and TRON since 06/11,"

Lookonchain reported.

The issuance relates to the creation of tokens, essentially pumping liquidity into the cryptocurrency market. In theory, it helps facilitate smoother transactions while allowing traders to hedge against volatility. The addition of USDT could enhance liquidity, potentially stabilize prices, and narrow spreads during high trading periods.

With BTC trading above $99,000 and experiencing high volatility, increased USDT liquidity could, depending on how it is deployed, stabilize the market or exacerbate price fluctuations.

However, the large scale of the recent issuances, totaling 19 billion in just over a month, has raised speculation. While Tether's ability to quickly meet liquidity demands demonstrates its utility, it also raises questions about the potential for oversupply if not managed effectively.

Concerns about USDT transparency

The cryptocurrency community has expressed concerns about whether Tether's issuances are fully backed by reserves. Critics argue that excessive issuance without adequate transparency could undermine market confidence, especially if Tether is unable to prove its reserves.

"A trustless system develops through transparency. Too many issuances without clarity can lead to uncertainty, like bad coffee,"

a user on X sarcastically commented.

This is not the first time this topic has been raised. Previously, Tether's CEO, Paolo Ardoino, has addressed these concerns, emphasizing the company's focus on robust backing. He believes stablecoins should maintain reserves primarily in high-quality assets like US Treasuries to minimize risks from uninsured deposits. Ardoino also mentioned ongoing discussions with regulators to establish legal frameworks that ensure stablecoin operations.

"Stablecoins should be able to hold 100% reserves in Treasuries, rather than putting themselves at risk of bank failure by holding the majority of reserves in uninsured deposits. In the event of a bank failure, the securities would revert to the rightful owners,"

Ardoino wrote.

However, the recent issuances highlight Tether's strategy to optimize liquidity. For example, a significant portion of USDT has been reallocated from less active blockchains to Ethereum, meeting the surging demand on this network. Such adjustments help maintain Tether's role as a primary source of liquidity in both centralized and decentralized markets, where the stablecoin accounts for around 85% of daily trading activity.

While these benefits exist, the rapid issuances also alter liquidity dynamics. Smaller blockchains may face declining activity as USDT supply is concentrated elsewhere. Additionally, the increased USDT supply on Ethereum could lead to network congestion, driving up transaction costs during peak trading periods.

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