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Tether, the issuer of the stablecoin USDT, has reclaimed its previous record-breaking market capitalization, defying the contraction of the stablecoin market.
On Thursday, USDT achieved a market capitalization of $83.2 billion, according to the company's announcement, matching its previous peak from just over a year ago. Remarkably, it has successfully recouped the entire $18 billion it had lost after the dramatic collapse of the blockchain project Terra in May 2022 and the subsequent market downturn.
Tether's achievement is noteworthy as it bucks the trend of a declining stablecoin market over the course of 14 months. With a total value of $129 billion, stablecoins form a crucial component of the cryptocurrency landscape, serving as a bridge between government-issued fiat currencies and digital assets while facilitating seamless trading in blockchain-based finance.
USDT has experienced significant advantages due to the recent troubles faced by its closest competitors. USDC, the second largest stablecoin issued by Circle, suffered from the collapse of its banking partner Silicon Valley Bank in March. As a result, the token continues to be affected by instability in its price. Additionally, Binance USD (BUSD), which once reached a value of $20 billion, was essentially rendered obsolete after New York state regulators compelled issuer Paxos to cease minting new tokens in February.
Tether has faced long-standing criticism due to its lack of transparency regarding its reserve assets, which includes the potential existence of risky loans to undisclosed debtors. In a lawsuit alleging Tether's involvement in manipulating the price of Bitcoin (BTC) through the issuance of newly created tokens, a U.S. judge ordered the company to provide documentation concerning the backing of USDT. Additionally, a Wall Street Journal article revealed that Tether had previously utilized falsified documents to establish bank accounts.
During this volatile period, holders of stablecoins have increasingly turned to USDT, attracted by its perceived security from U.S. regulators and banks. As a result, its market share has surged to its highest level in at least 22 months.
“Tether’s rise suggests peg stability is far more important for most stablecoin holders than issuer transparency,” Conor Ryder, an analyst at digital asset research firm Kaiko, noted in a report.
Last month, a report from Kaiko raised concerns regarding the "inordinate" surge in USDT's market capitalization, as it appeared inconsistent with the significant decline in trading volumes reaching multi-year lows. In contrast, the market capitalization of other stablecoins has typically correlated with their respective trading volumes.
In an interview with The Block, Paolo Ardoino, the chief technology officer of Tether, shed light on the discrepancy by explaining that USDT's market cap surge can be attributed to its growing utilization as a payment method, predominantly in emerging economies. This shift in usage has resulted in approximately 40% of all token activity being accounted for by USDT in these regions.
