Stablecoin Giant Tether USDT Attempts to Keep Dominance

On-chain data shows that investors are fleeing Tether (USDT). As a result, the stablecoin giant has suffered a substantial market share loss amid a string of market corrections.

Tether’s Losing Market Share

Tether currently holds a market capitalization of $68 Billion, which is lower than the $83 billion record. The stablecoin’s value has been in decline for a number of years. According to CoinGecko’s data, the stablecoin has shed approximately $4 billion since June 14, 2015.

TerraUST’s collapse pushed market players to seek sanctuary in other digital assets that maintain a one-to-one peg with the USD. The resulting market contagion caused crypto and stablecoins wobble. USDT lost its dollar parity briefly, plummeting to 95 cents.

While it managed to re-peg quickly, the deathly spiral resulted in many investors ditching the stablecoin giant for its rival – USDC, a top contender. Upon gauging further, it was found that, unlike the falling market cap of USDT, Circle’s flagship stablecoin has continued to follow an upward trajectory.

After topping out in the first week of March, USDC’s market cap quickly bounced back in mid-May. It became the stablecoin choice on Ethereum, as reported earlier.

Binance USD, (BUSD), saw a slight but important bounce back up. With TerraUSD gone, the three largest stablecoins – Tether, USD Coin, and Binance USD – have managed to retain their positions in the top ten leaderboard.

Tether’s shrinking market cap comes days after it refuted rumors that the stablecoin is largely backed by Chinese and Asian commercial paper. Celsius stated that the recent events have had an impact on the crypto lending platform.

“Celsius position has been liquidated with no losses to Tether. Tether’s lending activity with Celsius (as with any other borrower) has always been overcollateralized. Tether currently has zero exposure to Celsius with the exception of a small Tether equity investment. Tether is aware of other rumors being spread, suggesting that it has a lending exposure to Three Arrows Capital – again this is categorically false.”

Separately, Tether’s CTO – Paolo Ardoino – outlined an attack against the company’s servers, but reassured that it was not successful.

Stablecoin Economy

While other dollar-pegged tokens may be eating up Tether’s share, for the first time in history, the total stablecoin supply as a whole has dropped sharply in the second quarter of 2022 (excluding UST). Lucas Nuzzi, CoinMetrics’ head of research and development, is the subject revealedStablecoin redemptions rose dramatically due to concerns about insolvency and short-term liquidity.

Tether was the most centralized issuer, with approximately 7 Billion of its supply being wiped out in the last month. Investors tried to get out of the market and avoid further damage.

Despite this, stablecoins are seeing a steady increase in market cap as well as placement due to the rapid decline of all nonstablecoin crypto assets. Recent data shows that there’re four such digital assets in the top 10 largest cryptocurrencies, and the fifth one is close to breaking in as well.

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