Tether (USDT) balances on cryptocurrency exchanges hit an all-time high of $20.339 billion on August 13, a sign that investors are gearing up to invest in these stablecoins as a way to capitalize on crypto assets ahead of the U.S. Federal Reserve’s September interest rate decision.
Tether Treasury to mint $1 billion worth of USDT
Tether’s record balance on cryptocurrency exchanges followed the minting of $1 billion worth of the stablecoin by the Treasury of the same name. On August 13, data tracking platform Whale Alert noted that Tether had added $1 billion to the Ethereum network.
Tether CEO Paolo Ardoino recently clarified that the $1 billion USDT transaction was a “stock replenishment,” emphasizing that it was “approved but not issued.” In short, the tokens are reserved for future issuance requests and chain swaps.
In traditional finance, replenishment involves ordering inventory to meet demand without overstocking. Similarly, Tether creates USDT to maintain sufficient reserves, keeping it in the treasury until needed, ensuring smooth liquidity management without having to put it into circulation immediately.
According to data from the Tether Transparency page, as of August 14, $941.72 million USDT was “approved but not issued” on Ethereum. In other words, about 60 million USDT from the recent $1 billion mint have already entered circulation, highlighting strong demand.
Are USDT investors just sitting back and watching?
Historically, Tether’s exchange balances have increased in both bear and bull markets.
In a bear market, an increase in USDT holdings is often a sign that traders are switching volatile cryptocurrencies to stablecoins for safety amidst market uncertainty. Conversely, in a bull market, an increase in USDT accumulation may indicate that traders are stockpiling stablecoins to use to buy cryptocurrencies when prices drop.
Recent signs point to a possible turn to strength.
For example, on August 13, Tether Treasury sent $141.5 million USDT to Cumberland, a cryptocurrency trading firm. According to Lookonchain, the latter transferred the funds to several cryptocurrency exchanges, including Binance, Coinbase, and Kraken.
Cumberland transferred $1.08 billion worth of USDT to cryptocurrency exchanges in a week, suggesting institutional investors are bracing for potential market volatility ahead of the Fed’s September rate decision.
If the Fed’s decision leans toward cutting rates, as the CME data strongly suggests, that could create optimism in the market.
“With Tether and Circle issuing roughly $2.8 billion in new tokens early last week, this suggests that some institutional investors are pumping new capital into the crypto market,” Markus Thielen, senior research analyst at 10x Research, argues in a recent report.
“If this issuance trend (not just minting) continues, Bitcoin could see further upside.”
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.