- The stable coin regained its dominance in this sector by controlling 65% of the market.
- Its market capitalization is currently almost $1 billion away from reaching a new all-time high.
- Meanwhile rival stable currencies such as USDC and BUSD are struggling to maintain their parity against the dollar.
USDT, Tether.to’s stablecoin, is demonstrating more financial muscle than the competition by reaching a market valuation of nearly $81 billion on Monday, April 17, despite the prevailing uncertainty.
The world’s largest stablecoin is just shy of surpassing its own all-time high of $82.29 billion reached a year ago. This year the cryptocurrency, which trades at par with the dollar, has grown by approximately 20%.
In contrast its rivals USD Coin (USDC) from Circle and BinanceUSD (BUSD) are falling to yearly lows as they struggle to maintain their parity with the U.S. currency. USDT has managed to snatch significant market share from them again.
Traders have favored USDT
Analysts say USDT has been favored by cryptocurrency traders because there is a belief that the stablecoin has no exposure to the possible effects of the ongoing U.S. banking crisis.
But its rivals do. The circulating USDC, the second largest stablecoin, has fallen this year by around 25% to $31.82 billion. This is the cryptocurrency’s lowest market capitalization level since October 2021.
Its fall is directly attributed to the exposure the stablecoin had to the bankrupt Silicon Valley Bank. Moreover, BUSD’s market capitalization has fallen nearly 60% ($6.68 billion) so far this year.
This is the Binance cryptocurrency’s lowest level since April 2021. The issuer has been exposed to heavy scrutiny from U.S. regulators in 2023. In addition, the New York Department of Financial Services (NYDFS) ordered cryptocurrency firm Paxos to stop minting and issuing BUSD.
Stablecoins: securities or commodities?
There is a controversy surrounding the financial – stock market definition of cryptocurrency. According to the U.S. Securities and Exchange Commission (SEC), BUSD is a “security.” While the U.S. Commodity Futures Trading Commission (CFTC) argues that it is a “commodity”.
It is believed that this new definition of cryptocurrency helped Tether reassert its dominance in this cryptoasset sector by gaining control of 65% of all stablecoin circulating in the market.
The stablecoins circulating in the United States face a number of challenges, following the failure of the Terra / Luna project and the bankruptcy of several lenders and cryptocurrency exchange platforms last year.
Last April 16, the Financial Services Committee of the U.S. House of Representatives released the draft version of the stable coin bill that seeks to establish a definition for issuers.
Among other things, it establishes that non-US companies, as is the case of Tether.to and others, must be registered in the US if they have US citizens among their users or customers.
The draft bill, however, does not indicate which federal agency would be responsible for regulating stable coins.
Supply of stable coins falls
Despite the fact that the market capitalization of Tether (USDT) has grown, on cryptocurrency exchange platforms the supply of the stablecoin has registered a sensitive drop reaching June 2021 levels.
As of April 16, the total reserve circulating on cryptocurrency exchanges was 12.94 billion USDT, while at the beginning of this year it registered more than 17.89 billion USDT.
During 2023, the supply of stable coins on cryptocurrency exchange platforms has decreased by 42% to USDT 21.53 billion.
This is in line with the 21% year-to-date rise in the valuation of the cryptocurrency market. From $1 trillion in January, it has risen to $1.21 trillion at the close of the first quarter.
According to analysts, there has been a clear shift from “safe” stablecoins to risky cryptocurrencies during this period.
Although the volume of cryptocurrency trading in general this year has fallen due to several factors. Among them, the uncertainty generated by the high interest rate policy pursued by the Federal Reserve to combat inflation, regulations and the failure of some regional banks.
