Trading with Tetherโsย (USDT) USDT cryptoย stablecoin hasย dropped to its weakestย point in four years, while its marketย cap nears an record-breakingย peak of $83 billion.
Trading with Tetherโsย (USDT) USDT cryptoย stablecoin hasย dropped to multi-year bottomย Line, making the tokenโs boost to near all-time highs in marketย cap โquestionable,โ cryptocurrencyย market research company Kaiko stated in a Monday report.
As stablecoinsโ primary use is for trading, USDTโs recent increased supply to $83 Billion while the tokenโs use falls, โseems inordinate,โ reportsย by Kaiko.
Dollar-pegged cryptoย stablecoins, with a combined marketย cap of $129 billion, have become the backbone of the digital investment ecologicalย system, bridging traditional currencies with cryptocurrency and facilitating digitalย currency trading. USDT, announced by Tetherย (USDT), is the most broadly used cryptoย stablecoin measured by marketย capitalization and trading volume.
USDT has climbed this year to near its record-breakingย peak marketย capitalization in May 2022 of $83.4 billion. The boost has mainly stemmed from bank failures and a Unitedย States regulatory crackdown hitting rival cryptoย stablecoins, including Circleโs USDC and Paxosโ BUSD.
The tokenโs volumeย ofย trading, onย theย otherย hand, has sharply declined recently owingย to aย mix of lackluster cryptocurrency trading withinย a cryptocurrency bear market and Binanceย Cryptoย exchange, the worldโs largest exchange, reintroducing trading charges for USDT investment pairs. This weekend, USDTโs volumeย ofย dailyย trading dropped below $10 Billion for the 1st time since March 2019, reportsย by data by analytics company CoinGecko.
โ Andย once looking at actual usage of the cryptoย stablecoin on both centralized exchanges and decentralized exchanges, the increase seems inordinate,โ Kaiko said.
Curious case of USDT growth
The cryptocurrency industry has been scrutinizing Tetherย (USDT) for years about what assets back the value of USDT and the lack of audits. At the end of March, Tetherย (USDT) held approximately $82 Billion of assets including Unitedย States treasury bonds, gold and Bitcoinย (BTC) for $79 Billion of cryptoย stablecoins, reportsย by the reserves report signed by BDO Italy.
As trading volumes are sliding, and assuming that trading is the dominant use case for cryptoย stablecoins, a respective decline in marketย cap would be anticipated, reportsย by Clara Medalie, Kaikoโs research director. USDC and BUSD stablecoinsโ marketย capitalizations have shrunk in tandem with trading volumes. โ Onย theย otherย hand, we are not seeing this tendency for Tether,โ Medalie said.
1 possible justification for USDTโs trend-defying growth is the rotation to off-shore exchanges from regulated ones as Unitedย States regulatoryย authorities are increasingly separating cryptocurrency from the traditional financial system. โTraders that normally used Unitedย States dollars no longer have this as an option, thus are turning to Tether,โ Medalie said.
Another justification canย potentially involve the Tron blockchainย tech and its lower charges compared to Ethereumย (ETH). The majority of USDT cryptoย tokens are postedย on the cryptocurrency billionaire Justin Sun- established network, with Binanceย Cryptoย exchange owning the largest USDT addresses on Tron. โThere mayย be a relationship betwixt Tron, Tetherย (USDT), and Binanceย Cryptoย exchange, perhaps with market makers opting to use the network owingย to its minimalย charges, and supplying liquidity to Binanceย Cryptoย exchange with USDT,โ Medalie added.
Tetherย (USDT) had not returned a CoinDesk request for comment by the time of publication.
James Rubin.
