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In their recent blog post, Tether, the parent company of a USDT stablecoin, announced a token burn that will permanently eliminate 500 million units.
Yesterday, the company announced that the burning process had been completed.
Tether has just destroyed 500M USDt from the Tether treasury wallet with the following tx: https://t.co/HTG52LaRVh
For more information see the announcement here: https://t.co/McLTCGzmJi— Tether (@Tether_to) October 24, 2018
Why Did Tether Burn Half a Billion Coins?
It is currently unknown what has caused the token burn, although many believe that it was a result of the recent controversy. After the value of USDT dropped below $1 — which should not happen, since each coin is backed by this exact amount of USD — many started doubting if Tether can truly back all of its coins.
As a result, large amounts of USDT have been returned to the Tether treasury, as investors started giving up on the coin. In fact, most of this happened just after USDT’s value dropped to $0.85 on October 14. Since then, over 680 million tokens have been transferred back to Tether’s wallet.
These transactions came on three occasions. The first one was made on October 14 by Bitfinex, that sent around 200 million USDT to a cold storage vault reportedly owned by Tether. The next transaction occurred on October 16, and it also involved 200 million tokens. The final transfer was made three days later, on October 19, and it involved 230 million USDT coins being transferred to the same Tether treasury address.
As a result of these transfers, a large amount of Tether’s circulating supply was removed from the market. The removal was made permanent due to the company’s USDT redemption. In their statement they claim that Tether has redeemed a large number of tokens which will be burned, leaving around 466 million coins in circulation. Such a process is outlined in Tether’s whitepaper, with redemptions and issuances transparent, which can be observed on Tether’s treasury balance.
While the company did not say that the supply reduction was done with a specific intention, some believe that Bitfinex was the one who funded the redemption by selling 100,000 BTC. Additionally, the token burn came right after Coinbase announced support for Circle’s new stablecoin, USDC. This has also caused speculation that Tether is making moves to stay relevant.
While the recent listing of USD Coin on Coinbase will attract more attention to an emerging stablecoin, Tether is still not giving up. This is evident due to the fact that it is currently the only coin in the top 20 that is trading in the green. While its price is still below $1, and it only grew by 0.34% in the last 24 hours, the token burn seems to have had an important impact after all.
Featured image from Shutterstock.
