Cryptocurrencies rely on stablecoins like Tether (USDT) as foundational infrastructure. Over the past seven years, USDT has evolved into a cornerstone of the crypto ecosystem—facilitating capital inflows, enhancing liquidity, enabling asset pricing, and serving as the primary trading pair across exchanges.
From a $1 billion market cap during Bitcoin's 2017 bull run, Tether now oversees $70+ billion in assets. However, its reserve composition and operational dynamics remain opaque. A recent Protos analysis reveals an astonishing concentration: two entities—Alameda Research and Cumberland Global—dominate ~70% of USDT circulation.
Key Findings from the Protos Report
Protos analyzed blockchain data from all disclosed Tether Treasury wallets (2014–October 2021), excluding internal transfers between minters and Treasury. The study focused on third-party USDT interactions:
- $108.5B USDT minted
- $32.7B received by external entities
- 89.2% of minted USDT (970B) allocated to market makers/liquidity providers
Market Maker Dominance
Alameda Research and Cumberland Global collectively received $60.3B USDT (55% of total supply)**, with **$49.2B (71%) acquired in the past year alone—equivalent to 60% of annual USDT issuance.
1. Alameda Research
Founded by crypto billionaire Sam Bankman-Fried (SBF), Alameda operates as a quant trading firm, VC investor, and parent company of FTX.
- $36.7B USDT received (37% of total supply)
- 86% ($31.7B) acquired in the past year
- **87% ($30.1B)** routed to FTX; remaining funds distributed to Binance ($2.1B), Huobi ($1.7B), and OKEx ($115M)
2. Cumberland Global
A subsidiary of trading giant DRW, Cumberland serves as a bridge for institutional crypto entry.
- $23.7B USDT received (22% of total supply)
- 74% ($17.6B) acquired in the past year
- **79% ($18.7B)** sent to Binance; minor allocations to Poloniex ($131.5M), Bitfinex ($9M), Huobi/OKEx ($30M)
Other Notable Recipients
- iFinex (Bitfinex/Tether parent): $4.5B (4% of supply)
- Nexo: $2.6B (2%) via DeFi lending platforms
- Heka: $1.5B (1.5%)—a Malta-based firm linked to the Paradise Papers
Implications of USDT Centralization
- Systemic Risk: Heavy reliance on few entities could destabilize liquidity during market stress.
- Exchange Dependency: Binance, FTX, and Huobi absorb the majority of USDT flows.
- Opaque Operations: Many recipients operate from tax havens (BVI, Hong Kong, Seychelles) with limited transparency.
👉 Explore how top exchanges leverage USDT liquidity
FAQ
Q: Why does Tether allocate most USDT to market makers?
A: Market makers ensure liquidity across trading pairs, reducing slippage and stabilizing prices.
Q: How does Alameda Research use its USDT?
A: Primarily for FTX's liquidity needs, arbitrage, and venture investments (e.g., Solana).
Q: Is USDT's concentration a concern for regulators?
A: Yes—authorities increasingly scrutinize stablecoin issuers over reserve transparency and systemic risks.
👉 Dive deeper into stablecoin regulations
Conclusion
Tether's entrenched role in crypto is undeniable, but its supply concentration raises questions about decentralization and resilience. As Protos notes, entities like Three Arrows Capital have demonstrated USDT's profit potential—yet its dominance by a few players warrants closer examination.
Sources: Protos, Bitpush News