Tether (USDT) has been the subject of much discussion in the cryptocurrency world lately. As the world’s most popular stablecoin, USDT has been praised for its ability to maintain a steady price while still offering the benefits of digital currencies.
One major factor that has been fueling hopes for a major rally in the cryptocurrency market is the recent increase in Tether’s market cap. According to data from CoinMarketCap, Tether’s market cap has grown from just over $2 billion in January 2021 to over $62 billion as of August 2021.
This significant increase in market cap has been driven in large part by the growing demand for stablecoins in the cryptocurrency market. Cryptocurrency traders and investors are turning to stablecoins like USDT in order to avoid the volatility that is often associated with traditional cryptocurrencies like Bitcoin and Ethereum.
Tether’s ability to maintain a stable price has made it an attractive option for those looking to store their cryptocurrency holdings without the risk of price fluctuations. This stability has also made USDT a popular choice for trading pairs on cryptocurrency exchanges.
Many experts believe that the growing demand for stablecoins like USDT is a sign that the cryptocurrency market is maturing. As more traders and investors enter the market, they are looking for stable and reliable assets that can help them mitigate the risks of investing in volatile assets like Bitcoin.
The increase in Tether’s market cap has also been seen as a positive sign for the wider cryptocurrency market. Some analysts believe that the growing dominance of stablecoins like USDT could help to stabilize the market and reduce the impact of price swings caused by speculative trading.
In addition to the potential for stabilizing the market, the growing popularity of stablecoins like USDT could also help to increase adoption of cryptocurrencies more broadly. As more people become comfortable with the idea of using digital currencies like USDT, they may also become more open to using other cryptocurrencies for everyday transactions.
Despite the positive trends in the Tether market cap and the broader cryptocurrency market, there are still some risks and challenges to be aware of. One major concern is the potential for regulatory crackdowns on stablecoins and other cryptocurrencies.
There have already been some signs of regulatory scrutiny in the US and other countries, with regulators raising concerns about the potential for stablecoins to be used for money laundering and other illegal activities. Some experts have also warned about the risks associated with centralized stablecoins like USDT, which are backed by reserves that are controlled by a single company.
There is also the risk that the growing popularity of stablecoins could lead to market distortions or even a bubble. As more people invest in stablecoins like USDT, the demand for these assets could continue to grow even if they are not backed by the same level of reserves.
Despite these risks, many in the cryptocurrency community remain optimistic about the potential for Tether and other stablecoins to continue driving growth and stability in the market. As more traders and investors turn to USDT and other stablecoins, it is likely that we will see continued innovations and new developments in this space.
Whether you are a seasoned trader or a newcomer to the cryptocurrency market, it is important to stay informed and keep an eye on the latest trends and developments. By staying on top of the latest news and analysis, you can position yourself to take advantage of the opportunities and mitigate the risks associated with this exciting and dynamic market.
Despite lacklustre trade volume and price movements in the cryptocurrency market, Tether’s market cap is rising, nearing its all-time high of $82.9 billion. Tether, also known as USDT, is a stablecoin pegged to the U.S. dollar, making its value more stable than other cryptocurrencies.
The question remains: why is Tether’s market cap increasing despite the lack of strong movements in the cryptocurrency market? According to the research firm Kaiko, one theory is that the imminent end of BUSD, another stablecoin, and Circle’s USDC March de-pegging event caused traders to rotate into USDT. However, data does not show a significant increase in USDT market share relative to other stablecoins in recent months.
Another possible reason for Tether’s market cap increase is Binance’s promotion of TUSD as an alternative to BUSD. This move may have caused traders to move away from BUSD and towards other stablecoins, including USDT.
On decentralized exchanges (DEXs), USDT accounts for just 20% of non-stablecoin swap volume, an increase since the start of the year, but not enough to explain the more than $15 billion increase in market cap over the same period.
While the March banking crisis saw a large rotation of capital into USDT, the actual usage of the stablecoin on both centralized and decentralized exchanges suggests that the increase in market cap is “inordinate”, according to Kaiko. Furthermore, one possible explanation for Tether’s climbing market cap could involve the Tron network. Most of all, USDT, or $46 billion worth, are issued on Tron, compared to just $36 billion on Ethereum.
Despite Tron’s minimal decentralized finance (DeFi) activity and the lack of support from major exchanges like Coinbase, offshore exchanges such as Binance and OKX possess the largest USDT balances on Tron. This suggests that market makers and whales prefer Tron for its low transaction fees.
In contrast to Tether’s market cap, USDC’s market cap correlates with trade volume. As USDC volume grows, the market cap increases similarly, and vice versa. USDT’s market cap, however, has little correlation with trade volume, which is questionable given that the primary use case for this stablecoin is trading.
Overall, the implications of these movements for the broader cryptocurrency market remain uncertain. However, given the size of the Tether transfers, it is possible that they could impact the market’s overall stability and could lead to a surge or decline in cryptocurrency prices.
