Tether abandons Solana, swaps $1 billion USDT

In a backward step for the Solana ecosystem, stablecoin issuer Tether is set to swap 1 billion USDT on Solana for ERC20 tokens for use on Ethereum.

According to DeFiLlama, the price of SOL fell by about 0.03% following this news, taking the total value locked on Solana’s DeFi protocol down by 10.95% to $297.73 million.

According to Tether, the swap will happen with the help of a third party. Prior to the swap, Solana held 1.8 billion USDT, Ethereum $28 billion, and Tron approximately $34 billion. Tether’s stablecoins are available on Avalanche, Tezos, Algorand, Near, Polygon, Omni, EOS, Liquid, Statmint, SLP and Statmine.

with latest selfp, Solana will now hold approximately $1.7 billion USDT.

usdt swaps explained

On-chain swaps are used to transfer USDT from one blockchain to another. Customers of the exchange can deposit their Tether on blockchains such as Tron and withdraw funds on other blockchains such as Ethereum.

Sometimes exchanges need to move USDT from one chain to another in order to spread their USDT holdings more evenly. The exchange moves USDT from the source blockchain to the Tether Treasury wallet, from where it will be transferred to another chain.

On November 17, 2022, Tether clarified that Alameda Research, a quant trading firm with close links to exchange FTX, held USDT. Almeida paid an equivalent USD amount of USDT to Tether. Tether holds USD to buy liquid collateral such as US Treasuries. The only way for Alameda to liquidate its USDT is through Tether’s redemption process. Alameda does not hold Tether reserves on its balance sheet.

However, Solana has a close relationship with FTX, and has been doling out SOL tokens since FTX announced its liquidity problems on November 6, 2022.

The token has fallen by about 65% on the day, from $37.30 to $13.18 at press time. The total value locked in the Solana DeFi ecosystem has fallen by 97% since its peak of approximately $10.11 billion in November 2021. Several DeFi protocols on Solana also had exposure to FTX.

sol tvl
Sol TVL | Source: Defilama

Solana NFT marketplace MagicEden recently discontinued support for Project Serum, a decentralized exchange created by former FTX CEO Sam Bankman-Fried. At press time, the SRM token is trading at $0.25.

The Solana Foundation later revealed in a blog post on November 10, 2022, that it had $1 million in cash or cash equivalents locked in an FTX account when the exchange stopped withdrawals. It also holds 3.2 million FTX trading common stock shares, 3.43 million FTT tokens, and $134.54 million in SRM tokens. At press time, the FTT token is trading marginally at $1.43, meaning that most of the foundation’s holdings have been wiped out.

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