Newly-Minted $1 Billion USDT Not in Circulation: What is Tether Preparing For?

Key Takeaways

• Tether minting boosts market liquidity.
• USDT minting positively affects Bitcoin’s price.
• Whale Alert tweets amplify market reactions.

Tether’s recent minting of $1 billion in USDT has turned heads in the industry. Although the newly minted tokens have yet to enter circulation, they hold a lot of potential to influence the market, especially as Bitcoin’s price surges and market conditions improve. 

As the largest stablecoin by market cap, Tether exerts a crucial influence in the crypto market, ensuring liquidity and stability. Historical data shows that significant USDT issuances often coincide with increased market activity and price fluctuations. The question is how the newly minted USDT tokens will affect the market dynamics.

$1 Billion USDT Minting Explained 

Tether recently minted 1 billion USDT tokens on the Tron network. However, these tokens have yet to be released into circulation. Paolo Ardoino , the CEO of Tether, confirmed it was an “authorized but not issued transaction.” 

The minting is intended to support chain swap operations and manage liquidity across different blockchain networks without immediate market impact. Tether tokens are used on several blockchains, including Bitcoin (Omni Layer), Ethereum, EOS, Algorand, and Solana. 

The Tron network is the most used blockchain for USDT due to its stable fee of $1 per transaction. Justin Sun  further highlighted this as USDT reached the $60 billion milestone.

Tether’s strategic minting could be part of its ongoing efforts to maintain a robust supply of USDT to meet market demands. According to Tether’s website , USDT tokens minted for “inventory replenishment” that are “authorized but not issued” are not fully backed by real reserves such as U.S. dollars, U.S. bonds, or other collateral assets that Tether claims to use to ensure the legitimacy and redeemability of issued USDT.

Potential Impacts on the Crypto Market

Market Liquidity

The injection of $1 billion USDT into the market could significantly increase market liquidity. As more stablecoins become available, traders have greater flexibility to enter and exit positions, which can enhance market stability and efficiency.

Price Movements

Tether’s issuance of USDT has a significant impact on the cryptocurrency market, especially on Bitcoin. According to a study by Dr. Aman Saggu in collaboration with Blockchain Research Lab , Bitcoin prices tend to rise shortly after Tether mints new USDT. Specifically, Bitcoin prices increase by approximately 0.4% after 5 minutes, 0.5% after 10 minutes, 0.6% after 15 minutes, and 0.8% after 30 minutes following a $1 billion USDT minting event. 

This response suggests that investors view USDT minting as positive news, likely due to the increased liquidity and demand it signals in the market.

Interestingly, investors do not react similarly to USDT burning events, indicating that the market does not perceive a reduction in USDT supply as negative news. The study also highlights that Bitcoin’s price response to USDT minting is more pronounced during periods of strong market sentiment and bullish conditions, driven by the fear of missing out (FOMO).

Investor Sentiment

The minting of USDT often signals confidence in the market, potentially boosting investor sentiment. As USDT provides a stable trading medium, its availability can encourage more trading and investment in cryptocurrencies, fostering a positive market outlook.

Additionally, the role of Whale Alert, a service that tracks significant cryptocurrency transactions and announces them on Twitter, is crucial. The Blockchain Research Lab  study also found that Bitcoin prices respond more to Whale Alert tweets about USDT minting than to the minting events themselves. This shows the importance of information dissemination in driving market reactions.

Comparisons to Previous USDT Minting Events

Significant market movements have often followed previous large-scale USDT mintings. The most recent instance of Tether minting USDT without immediately putting it into circulation occurred on June 12, 2023. Tether minted $1 billion USDT on the Ethereum blockchain for “inventory replenishment” purposes.

The total cryptocurrency market cap declined at the time, coming to a low of around $1 trillion. After the Tether mint, we saw an increase of 22.76% to a high of $1.22T a month later, on July 12, 2023. 

Conclusion

Tether’s minting of $1 billion USDT is a notable event with potentially far-reaching implications for the cryptocurrency market. Increased liquidity, potential price movements, and boosted investor sentiment are key factors to watch as the market absorbs this new supply of stablecoins. As per the Blockchain Research Lab study and compared with the previous time, when $1 billion USDT was minted and kept in the Treasury, the impact on the general market is expected to be bullish.