Kaiko Questions USDT Market Cap Rise as Trading Volume Hits Multi-Year Lows

Kaiko Questions USDT Market Cap Rise as Trading Volume Hits Multi-Year Lows

Trading with Tether’s USDT stablecoin reaches multi-year lows, questioning the token’s near all-time high market capitalization of $83 billion, as reported by crypto market research firm Kaiko.

Trading with Tether’s (USDT) USDT crypto stablecoin has  dropped to its weakest point in four years, while its market cap nears an record-breaking peak of $83 billion.

Trading with Tether’s (USDT) USDT crypto stablecoin has  dropped to multi-year bottom Line, making the token’s boost to near all-time highs in market cap “questionable,” cryptocurrency market research company Kaiko stated in a Monday report.

As stablecoins’ primary use is for trading, USDT’s recent increased supply to $83 Billion while the token’s use falls, “seems inordinate,” reports by Kaiko.

Dollar-pegged crypto stablecoins, with a combined market cap of $129 billion, have become the backbone of the digital investment ecological system, bridging traditional currencies with cryptocurrency and facilitating digital currency trading. USDT, announced by Tether (USDT), is the most broadly used crypto stablecoin measured by market capitalization and trading volume.

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USDT has climbed this year to near its record-breaking peak market capitalization in May 2022 of $83.4 billion. The boost has mainly stemmed from bank failures and a United States regulatory crackdown hitting rival crypto stablecoins, including Circle’s USDC and Paxos’ BUSD.

The token’s volume of trading, on the other hand, has sharply declined recently owing to a mix of lackluster cryptocurrency trading within a cryptocurrency bear market and Binance Crypto exchange, the world’s largest exchange, reintroducing trading charges for USDT investment pairs. This weekend, USDT’s volume of daily trading dropped below $10 Billion for the 1st time since March 2019, reports by data by analytics company CoinGecko.

“ And once looking at actual usage of the crypto stablecoin on both centralized exchanges and decentralized exchanges, the increase seems inordinate,” Kaiko said.

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Curious case of USDT growth

The cryptocurrency industry has been scrutinizing Tether (USDT) for years about what assets back the value of USDT and the lack of audits. At the end of March, Tether (USDT) held approximately $82 Billion of assets including United States treasury bonds, gold and Bitcoin (BTC) for $79 Billion of crypto stablecoins, reports by the reserves report signed by BDO Italy.

As trading volumes are sliding, and assuming that trading is the dominant use case for crypto stablecoins, a respective decline in market cap would be anticipated, reports by Clara Medalie, Kaiko’s research director. USDC and BUSD stablecoins’ market capitalizations have shrunk in tandem with trading volumes. “ On the other hand, we are not seeing this tendency for Tether,” Medalie said.

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1 possible justification for USDT’s trend-defying growth is the rotation to off-shore exchanges from regulated ones as United States regulatory authorities are increasingly separating cryptocurrency from the traditional financial system. “Traders that normally used United States dollars no longer have this as an option, thus are turning to Tether,” Medalie said.

Another justification can potentially involve the Tron blockchain tech and its lower charges compared to Ethereum (ETH). The majority of USDT crypto tokens are posted on the cryptocurrency billionaire Justin Sun- established network, with Binance Crypto exchange owning the largest USDT addresses on Tron. “There may be a relationship betwixt Tron, Tether (USDT), and Binance Crypto exchange, perhaps with market makers opting to use the network owing to its minimal  charges, and supplying liquidity to Binance Crypto exchange with USDT,” Medalie added.

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Tether (USDT) had not returned a CoinDesk request for comment by the time of publication.

James Rubin.


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