A new report by blockchain analytics firm Flipside Crypto claims that most of Tether’s use takes place on centralized arbitrage exchanges.
In a publication published on May 28, Flipside Crypto analyzed the activities of the Tether chain to find that most of the USDT is used for stock arbitrage. Flipside compiled a visual graph of Tether’s activity in the chain, showing that all newly issued USDTs were filtered through the Bitfinex cryptocurrency exchange before being placed on the market.
The report points to the overlap in parent companies between Tether and Bitfinex, which became a major interest for the New York Attorney General’s Office in April 2019. Bitfinex was accused of using $ 850 million in Tether funds to cover losses caused by the sudden seizure of the now defunct Crypto Capital payment processor.
The report went on to reveal that no USDT has ever been “burned” or removed from the market.
Instead, Flipside argues that Tether’s main use was for arbitrage in centralized cryptocurrency exchanges.
According to the report, it is
clear that most of Tether is used on centralized exchanges, namely Huobi (in light gray), Binance (in yellow) and Bitfinex (in green). The constant back and forth movement between users (in red) and these exchanges reflects the fact that Tether is mostly used for arbitrage. Consumers can easily make a profit by buying from one exchange and selling at another for a higher price.
Flipside went on to explain that traders pay higher Tether transaction fees to send USDT directly between personal portfolios, as opposed to exchange processing, to create faster and more efficient arbitrage.