Alameda, Backed by SBF, Generated $38 Billion in USDT Through Arbitrage Trading for Substantial Gains
Data from the blockchain reveals that Alameda Research redeemed more than $38 billion worth of Tether (USDT) tokens in 2021.
Because Bitcoin
October 10, 2023
Data from the blockchain, flagged by Coinbase director Conor Grogan, reveals that Alameda Research redeemed more than $38 billion worth of Tether (USDT) tokens in 2021. Surprisingly, this redemption occurred even though Alameda didn't have an equivalent amount of assets under management.
Grogan points out that the total value of USDT creation exceeded the total assets Alameda held during the peak of the cryptocurrency market bull run in 2021. Additionally, Grogan suggests that FTX-ordered USDT redemptions likely involved Alameda's tokens, totaling 3.9 billion USDT, with a significant portion of these redemptions happening during the collapse of Terra's algorithmic stablecoin.
Former Alameda co-CEO Sam Trabucco provided insights into how the firm profited from arbitrage opportunities related to USDT's value against various trading pairs on different exchanges. He explained that the premium at which USDT trades to $1 was usually volatile, especially in BTC/USDT and BTC/USD markets, which are more liquid than exchanges' USDT/USD markets.
Trabucco highlighted that USDC, another USD-pegged stablecoin, had a less volatile premium due to its creation and redemption process. Since select firms can create and redeem USDT, most market players acquire and trade USDT from markets rather than directly from Tether's treasury.
Alameda took advantage of these opportunities by creating and redeeming USDT tokens as needed, allowing them to collect premiums and keep USDT's dollar peg stable. Sam Bankman-Fried, the founder of FTX and Alameda Research, confirmed that Alameda actively redeemed USDT for U.S. dollars during this period.
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