But investors are withdrawing from their USDT positions, as over $335 million were redeemed in the last 24 hours, according to renowned crypto news reporter Colin Wu on August 8.
Paolo Ardoino, CTO at Tether Holdings Inc. and Bitfinex, had previously reported over $325 million in USDT redemptions, explaining that: “When you redeem USDT, it means you want to have fiat (USD) back.”
The above numbers can be seen through the aggressive drop in Tether’s stablecoin market capitalization, showing a loss of around $0.33 billion in market cap in a single move — from $83.81 billion to $83.48 billion, according to data retrieved by Finbold from CoinMarketCap index on August 8.
Different from other cryptocurrencies, dollar stablecoins are designed to have a stable price in USD, pegged 1:1 to the US dollar. Therefore, its market cap indexes usually reflect the amount of coins in circulation.
When the market cap increases, it usually means that more USDT is being put into circulation, with investors swapping their fiat dollars for the Tether token. The opposite is also true, as market cap drops usually mean investors are burning their USDT in exchange for USD in the traditional banking system.
The current event happens amid the launch of a new stablecoin in the market by a large competitor. PayPal has announced the rollout of PayPal USD (PYUSD), an ERC-20 United States dollar-pegged stablecoin issued by crypto firm Paxos Trust Company on the Ethereum (ETH) blockchain and fully backed by USD deposits, short-term Treasuries, and similar cash equivalents, on August 7.
How users can redeem USDT with Tether?
Paolo Ardoino also said, in the same tweet, that there has been some ‘fear, uncertainty, doubt’ (FUD), regarding user’s abilities to redeem their money within Tether Holdings Inc.
The CTO explains that Tether’s onboarding process is happening as usual, but it requires the investors to fulfill a few conditions, such as a Known Your Customer (KYC) identification process and “basic information like the source of funds.”
“Since Tether relies on a strong network of banking partners, it’s important to ensure to have a proper KYC/AML before onboarding a customer. Failing to do so would put all Tether users at risk.”
– Paolo Ardoino, CTO at Tether Holdings
The swaps are then made directly with the controlling company, that are required to be able to redeem all USDT in circulation for its correspondent amount in US dollar.
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