Tether (USDT) has emerged as a clear winner amid the ongoing banking crisis and cryptocurrency crackdown in the United States.
On April 17, the circulating market valuation of the US dollar-pegged stablecoin hit nearly $81 billion, just 1.5% below its all-time high of $82.29 billion a year ago. It has grown 20% so far this year and is on the verge of hitting new all-time highs.
Tether Rivals Hit New Yearly Lows
USDT’s growth came as Tether ate up market share from its stablecoin rivals, USD Coin (USDC) and Binance USD (BUSD). This is due to the belief of cryptocurrency traders that Tether operations are not exposed to possible contagion from the banking crisis.
For example, The circulating market capitalization of USD Coin, the second-largest stablecoin, has fallen more than 25% over the year to $31.82 billion, its worst since October 2021, mainly due to its exposure to failed Silicon Valley Bank.
BUSD, for its part, has witnessed a 60% drop in market capitalization in 2023 to $6.68 billion, its lowest level since April 2021, while the New York Department of Financial Services (NYDFS) ordered Paxos, a regional cryptocurrency firm, to stop its minting and issuance.
Besides, the United States Securities and Exchange Commission (SEC) states that BUSD is a “security”. On the contrary, the American Commodity Futures Trading Commission (CFTC) alleges that the stablecoin is a “commodity”.
This capital change likely helped Tether push its dominance above 65% in the global stablecoin sector for the first time since May 2021, according to data from Glassnode.
On April 16, the US House of Representatives Committee on Financial Services released a draft version of its potential stablecoin bill to create definitions for issuers. He says that non-US companies like Tether must register if they cater to Americans, though without mentioning the specific agency that would regulate stablecoins.
Exchange stablecoin supply is lowest since June 2021
Despite Tether’s market cap growth, its supply across cryptocurrency exchanges has declined in 2023.
As of April 16, cryptocurrency exchanges had 12.94 billion USDT in their reserves, up from 17.89 billion USDT at the beginning of the year. On the whole, stablecoin supply on exchanges has fallen 42% to $21.53 billion.
This dynamic coincides with the 21% year-on-year rise in the valuation of the cryptocurrency market, which has gone from $1 trillion in January to $1.21 trillion, suggesting that the first quarter has seen a turnaround for stablecoins. “safe” to risky cryptocurrencies.
This article does not contain investment advice or recommendations. All investments and trades involve risk, and readers should do their own research when making a decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.