Regardless of lackluster trade volume and price movements in the digital currency market, Tether’s market capitalization is growing, nearing its record-breaking peak of $82.9 billion. Tether (USDT), likewise known as USDT, is a crypto stablecoin pegged to the United States dollar, making its price more stable than other cryptocurrencies.
USDT’s Explosive Growth
The question remains: why is Tether’s market capitalization increasing regardless of the lack of strong movements in the digital currency market?
According to the research company Kaiko, one theory is the fact that the imminent end of BUSD, another crypto stablecoin, and Circle’s USDC March de-pegging event caused traders to rotate into USDT. Nonetheless, data does not show a whole lot of boost in USDT market share relative to other crypto stablecoins in recent months.
Another possible reason for Tether’s market capitalization 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 crypto stablecoins, including USDT.
On decentralized exchanges (DEXs), USDT accounts for just 20 percent of non- crypto stablecoin swap volume, an increase since the start of the year, but not enough to explain the greater than $15 Billion boost in market capitalization over the same period.
Although while the March banking crisis saw a large rotation of financial resources into USDT, the actual usage of the crypto stablecoin on both centralized and decentralized exchanges implies that the boost in market capitalization is “inordinate”, reports by Kaiko. Furthermore, one possible justification for Tether’s climbing market capitalization could involve the Tron network. Most of all, USDT, or $46 Billion worth, are posted on Tron, compared to just $36 Billion on Ethereum (ETH).
Regardless of Tron’s minimal decentralized finance (DeFi) activity and the lack of support from major exchanges like Coinbase Crypto exchange, offshore exchanges such as Binance Crypto exchange and OKX possess the largest USDT balances on Tron. This implies that market makers and whales prefer Tron for its low transaction fees.
In contrast to Tether’s market capitalization, USDC’s market capitalization correlates with trade volume. As USDC volume grows, the market capitalization increases similarly, and vice versa. USDT’s market capitalization, on the other hand, has little correlation with trade volume, which is questionable given that the primary use case for this crypto stablecoin is trading.
Large Tether (USDT) Movements Raise Questions About Market Stability
According to Whale Alert on Twitter platform, there have been plenty of large movements of Tether’s crypto stablecoin, USDT, in the digital currency market in the past 3 hours. These movements suggest a whole lot of transfer of funds, with implications for the broader market.
First, an unknown wallet transferred 50 Million USDT, or $50 Million, to Bitfinex, a trending digital currency exchange. This was followed by Kraken, another leading exchange, transferring 60 Million USDT, or $60 Million, to Bitfinex. Lastly, Tether (USDT) Treasury, the issuer of USDT, transferred 60 Million USDT to Bitfinex. In addition, 50 Million USDT was transferred from JustLendDAO to an unknown wallet.
The movements of these large sums of money suggest that whole lot of trading or financing activity may occur on Bitfinex, one of the largest digital currency exchanges. These transfers could be related to a large buy of digital currency or a whole lot of financing by a hedge fund or institutional investor.
In general, the implications of these movements for the broader digital currency market remain uncertain. Nonetheless, given the size of the Tether (USDT) transfers, it is possible that they could impact the market’s overall stability and could lead to a surge or decline in digital currency prices.
Featured image from iStock, chart from TradingView.com