A new report by blockchain analytics firm Flipside Crypto claims that most of Tether’s use occurs on centralized exchanges for arbitrage. 

In a post published May 28, Flipside Crypto analyzed Tether’s on-chain activity to find that the majority of USDT is used for exchange-based arbitrage. Flipside compiled a visual chart of Tether’s on-chain activity, showing that all newly minted USDT is filtered through the cryptocurrency exchange Bitfinex before being released to the market. 

The report pointed out the overlap in parent companies between Tether and Bitfinex, which became a primary point of interest for the NY Attorney General’s Office in April 2019. Bitfinex was accused of using $850 million in funds from Tether to cover losses incurred by the sudden seizure of its now-defunct payment processor Crypto Capital.

The report continued, revealing that no USDT had ever been “burned” or removed from the total market supply.

Instead, Flipside argued that Tether’s primary use has been for arbitrage on centralized cryptocurrency exchanges. 

According to the report, 

It’s pretty clear that most of Tether is used on centralized exchanges, namely Huobi (in light grey), Binance (in yellow) and Bitfinex (in green). The constant movement back and forth between users (in red) and these exchanges reflects the fact that Tether is mostly used for arbitrage. Users can easily make a profit by buying from one exchange and selling on another for a higher price.

Flipside continued, explaining that traders are paying higher fees on Tether transactions to send USDT directly between personal wallets, as opposed to processing through exchanges, in order to create faster and more efficient arbitrage. 

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