Stablecoin Tether (USDT) Becomes Leading Cryptocurrency by Trading Volume

Stablecoin Tether (USDT) Becomes Leading Cryptocurrency by Trading Volume

Source: Shutterstock

According to the research company The Block, the dominance of the stablecoin Tether has grown significantly in the crypto market. The bias of trading towards USDT can have far-reaching consequences for the market as a whole.

According to The Block, for three years from 2017 to 2020, the share of USDT trades increased from 5% to 70%. It was due to the diminution of bitcoin in 2017 that its price rose to a record high of $20K. And the growth of trading with USDT reduces the rate of both the leading cryptocurrency and other cryptocurrencies. Now, BTC accounts for only 15% of trading, 74% falls on the share of all stablecoins, 70% of this is on the share of USDT.

Earlier this year, the share of USDT trades reached even 80%. According to analysts from The Block, USDT’s dominance will continue in the coming years. Analyst Larry Cermak believes that the expansion of crypto market tools and the popularity of such tools as crypto derivatives and crypto lending speaks in favor of this forecast. The use of stablecoins and USDT, in particular, prevails just in those areas. Going forward, the dominance of stablecoins will be supported by central bank digital currencies (CBDCs), which are essentially also stablecoins.

Over the year, the capitalization of Tether quadrupled, USDT came third, displacing Ripple (XRP). Now the gap between the third and fourth cryptocurrencies is already over $4 billion. The growth of the USDT capitalization is due to the additional emission since the coin rate does not change by definition. Last August, USDT was created in the amount of $3 billion once again. According to Tether, this happened as a result of the conversion of fiat money into cryptocurrency. Many funds and investment companies have gone this way after the markets fell in March. The increase in the capitalization of USDT also occurs as a result of the spread of crypto-derivatives, that is, there are derivatives of financial instruments of digital assets.

According to Bloomberg forecasts, in 2021 USDT will become the second cryptocurrency in terms of capitalization, displacing ETH. Today the capitalization of ETH is almost 3 times that of USDT. But the rise in USDT is not limited by anything, according to Bloomberg. Its expansion can only be limited by the regulator, which is unlikely amidst the global CBDC parade. Such a decision can only be made if a digital dollar is issued. But according to the Fed, this issue is not being considered yet. Perhaps the Fed is taking into account that the digital dollar function is being successfully implemented by the stablecoins backed by the US dollar. However, it is unlikely that USDT will come out on top in terms of capitalization, since, according to Bloomberg, the growth of USDT capitalization leads to an increase in BTC capitalization. It is through USDT that new large investors enter the crypto market, especially from Asian countries.