Alameda Research’s Massive 47% Stake in USDT Minting Unveiled

• Alameda Research minted 47% of Tethers currently in circulation.
• Implications of a single entity’s dominant role on the largest stablecoin.
• SBF’s Alameda Research was behind the collapse of FTX. 

The power of Sam Bankman-Fried’s fallen empire is widely known in crypto circles. Still, the substantial minting share in Tether’s (USDT) by FTX’s trading arm Alameda Research is raising eyebrows. The firm, now insolvent, created nearly half of the stablecoin’s circulating supply. The revelation points to a concerning level of centralization in what is meant to be a decentralized space.

Uncovering Alameda’s Tether Minting Spree

On Monday, October 9, Coinbase Director Conor Grogan unveiled that Alameda Research had minted $39.55 billion USDT. This staggering amount accounts for 47% of Tether’s current circulating supply.

The intertwining of Alameda and Tether wasn’t casual; it was systematic. Alameda’s venture into multiple crypto facets necessitated a close relationship with Tether, propelling its market activities. 

A significant portion of the minted USDT fueled liquidity on FTX, a crypto exchange steered by Alameda. However, the narrative darkened as financial mismanagement led to Alameda and FTX’s bankruptcy in November 2022. This cast shadows on Tether’s operational transparency.

In 2021, Sam Trabucco, a notable figure from Alameda Research, expressed trust in USDT, hinting at a deep-rooted partnership between Alameda and Tether. 

“Having done so much of this and worked so closely with their team is why we trust USDT much more than the rest of crypto Twitter seems to at times,” Trabucco explained. 

How Tethers are Made and Why Alameda Minted So Many

Creating new Tether (USDT) tokens, known as “minting,” starts when an investor or an entity deposits US dollars with Tether Ltd., the company behind USDT. In return, Tether Ltd. creates an equivalent amount of USDT tokens and gives them to the depositor. This 1:1 exchange rate between US dollars and USDT keeps Tether’s value stable.

Alameda Research’s extensive minting of Tether tokens primarily bolsters its cryptocurrency trading and investment ventures. One of the pivotal reasons was to enhance liquidity, especially on its crypto exchange platform, FTX. By minting USDT, Alameda could seamlessly channel funds into FTX, ensuring a fluid trading experience for all users on the platform. 

Furthermore, the abundance of USDT enabled Alameda to engage in market arbitrage, capitalizing on asset price differences across various markets. This was a profitable venture and a mechanism to maintain price stability in the markets they operated in.

On the Flipside

• Tether has been on the receiving end of criticism over reserve transparency for most of its existence. 
• Despite concerns by some users, Tether remains by far the biggest stablecoin. 

Why This Matters

The unveiling of Alameda Research’s massive stake in Tether minting shines a light on a critical aspect of the cryptocurrency ecosystem—centralization. 

Read more about Tether and its critics:
Tether (USDT): A Giant With Feet of Clay?
Read more about blockchain auditor Hacken partnering with Radix:
Hacken and Radix Join Forces for More Secure Blockchain