Last week saw Tether printed two billion dollar-backed tokens - a new record for the leading stablecoin project.
As per data from Coin Metrics, more than 24.6 billion tethers currently circulate across Ethereum, Tron, and Bitcoin's Omni Layer, up from 4.8 billion one year ago.
Sam Trabucco, the quantitative trader at Alameda Research, noted the growth stems from a variety of factors. He noted "Some [people] don't put trust in their local banks or currencies," in which case using USDT is the "most liquid USD-like exposure the market has access to."
Growth also shows when traders start to "aggressively sell BTC into USDT" or vice versa, Trabucco said, which can result in the dollar-pegged token temporarily trade above or below its peg.
As of now, USDT has traded slightly above $1 until early Monday morning when it dropped below the mark, as per market data from U.S.-based cryptocurrency exchange Kraken.
Paolo Ardoino, Tether and Bitfinex CTO, noted new deep-pocketed institutional Bitcoin investors like MicroStrategy or Ruffer Invest executing over-the-counter (OTC) buy orders have also led to significant USDT supply growth.
Ardoino noted, "Among Tether customers are all the major OTC desks and high-frequency trading firms in the space." OTC desks will convert to USDT as usual and spread the buying pressure across all possible liquid venues, creating demand for more stablecoins via taking the buyer's funds.
Trabucco also pointed out "heightened volumes" across all cryptocurrency trading venues over the past few weeks combined with the ability to use USDT as collateral for an increasing number of derivatives products” as extra reasons for Tether's substantial supply growth.
It is worth noting that trading volumes for markets quoted in USDT continue to outpace Bitcoin-quoted pairs, which used to be where most trading volumes concentrated.
As for Tether, all of these combined market dynamics "have led to an increase in creation", according to Trabucco.
Weekly USDT supply growth since 2017Source: Coin Metrics
As its meteoric supply grows, increased attention has been paid to questions about Tether's backing, an issue that is even the subject of an inquiry by the New York State Attorney General's office.
The court previously stated Tether reserves cover cash, short-term reserves, and other cryptocurrencies. However, no bank statements or legal documents supporting this claim have been published since 2018, when Bahamas-based Deltec Bank published an unsigned letter affirming that Tether held $1.8 billion in reserves, comparable with the amount of USDT issued at the time.
April 2019, Tether's supply was merely around 74% backed by fiat equivalents, as per a statement from its general counsel. However, reiterating a later statement made in November 2019, Ardoino took to Twitter on New Year's Eve noting, "Tether is fully backed, full stop."