If exchanges can create stable coins(USDT) by converting their profits by selling crypto for $ to legally back their pegged coins, where do they sell that crypto? The market makers can control the price right? Legit question.
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Stablecoins generally aren't backed by exchange profits, they're backed by the deposits that customers (MMs) send in when they create the stablecoins.
And for where they sell that crypto--it might be OTC but the price will be tied to e.g. Coinbase because there's an arb.