This is super weird because the trading pair on exchanges is BTC/USDT and USDT is redeemable for USD. So technically issuers of USDT who hold a great deal of it to trade a market to maintain the price of USDT ARE on the hook for the volatility of the USDT/BTC pair. Again what you said was:
“ Engage in market-making on exchanges, earning as a function of the bid/ask spread and exchange volume facilitated by the issuer’s trading desk.”
If the issuer is the exchange then the exchange needs to engage in market making activities to maintain the price of the stablecoin. So no I’d have to vehemently disagree with you that the spread is NOT between USD/USDT.
Now I’m not very smart so if you say something smart you are probably going to make me realize how stupid my statement is… but it hurts my brain just trying to make sense of it. If the exchange is the issuer then the exchange holds a large sum of the issued asset to maintain ask/bid spreads. This ownership implies that they are eating losses as more and more people demand USDT in exchange for BTC.
I’m missing something…