According to a number of indicators, the Tether (USDT) stablecoin is quickly becoming one of the biggest beneficiaries of the current volatility in the cryptocurrency markets.
According to data provided by CoinGecko, the market value of the stablecoin known as Tether reached approximately $75 billion early on Thursday morning, marking its biggest level since May 2022.
The market capitalization of USDT has recently surpassed that of USD Coin (USDC), the world’s second-largest stablecoin, which was issued by the firm Circle and is based in Boston. USDT’s market cap is now almost twice as large as that of USDC.
The two stablecoins are now the cryptocurrencies with the highest market capitalization, making them the market leaders in this category. The value of stablecoins has skyrocketed over the course of the past few years, making them an essential component of the economy of digital assets. According to CoinGecko, the market capitalization of USDC was approximately $564 million in March 2020. As of now, however, that number has increased to $37.7 billion.
However, in recent times, due to the ongoing banking crisis, Circle’s market cap has taken a significant knock. The scandal that has surrounded Silicon Valley Bank (SVB), where Circle had as much as $3.3 billion in reserves, caused the stablecoin to temporarily lose its planned $1 peg last week.
The data demonstrates that many investors have not yet returned to the market after fleeing to other assets after the peg was removed.
The preponderance of tether rises
Even though USDC’s problems appear to be handled and it is now trading back at parity with the dollar, the aftershocks from the SVB bank run suggest that investors have been progressively opting for USDT. This is despite the fact that USDC’s problems appear to be resolved and it is now trading back at parity with the greenback.
According to Glassnode, this point has been driven home by the fact that the dominance of USDT has increased to 58.1%, reaching its highest level since the middle of September 2021.
The dominance of USDC, on the other hand, has decreased to little more than 30%, which is a considerable decline from around 38% in the summer of 2017, which is when Circle’s stablecoin attempted to profit on USDT’s difficulties in the midst of the Terra crisis.
During that time, USDT momentarily lost its dollar peg, and as a result, holders of Tether quickly exchanged more than $7 billion worth of the stablecoin for fiat currency. This process took about 48 hours.
The regulatory crackdown that led to Paxos, the issuer of the stablecoin, stopping the minting of the token resulted in a rapid fall in Binance’s BUSD stablecoin supply. This sharp decline helped fuel USDT’s rising dominance, and it is another reason why USDT’s growing dominance is occurring.
According to information provided by CoinGecko, the market for BUSD has shrunk from $16 billion on February 13 to only $8.3 billion as of today.