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Tether (USDT) Surpasses $6bn in Market Cap

Tether, the world’s first and by far the most popular stablecoin, has just surpassed $6 billion in market capitalization. While the number might not seem high when compared to Bitcoin’s $117.75 billion and Ethereum’s $14.63 billion market cap, it’s still a huge achievement for a relatively new and often underappreciated asset class.

According to data from Skew Research, Tether (USDT) has seen an almost parabolic growth in the last week of March, jumping from just over $5.6 billion on Mar. 24 to $6.2 billion on Mar. 31. An interesting takeaway from USDT’s rise is the fact that it saw vertical growth in market capitalization on Mar. 25 and Mar. 26, with each following day seeing a slightly slower market cap increase. 

Graph showing Tether’s (USDT) market cap in US dollars from Mar. 24 to Mar. 31, 2020

(Source: Skew)

Zooming out even further puts USDT’s market cap growth into perspective. The world’s largest stablecoin has had a relatively flat capitalization of around $4.1 billion throughout most of 2019 and has entered 2020 without any major signs indicating a rapid rise in volume. 

After a vertical jump from $4.1 to $4.6 on Jan. 7, USDT’s market capitalization remained equally as flat until mid-March, Skew data has shown. But, Mar. 16 marked the beginning of a few incredibly volatile days, with Tether fighting for its life alongside the rest of the market.

However, instead of entering a period of slow consolidation, Tether saw a vertical pump, recording a $1 billion increase in market capitalization between Mar. 20 and Mar. 21. 

Graph showing the market capitalization for Tether (USDT) from October 2019 to March 2020

(Source: Skew)

In hindsight, it seems that the mid-March market downturn had very little effect on Tether and the rest of the stablecoin market, with more money pouring into USDT than it did ever before. This, according to several analysts, is a result of a combination of several market factors. 

Firstly, the panic surrounding the coronavirus epidemic has shaken the crypto market to its core. However, while prices dropped significantly, it was the confidence in the crypto industry as a whole that saw the biggest loss. Traders and investors alike raced to minimize their losses and leave their positions on major cryptocurrencies such as Bitcoin, Ethereum, and XRP. While some managed to cash out, others took to stablecoins to protect their investments. 

The uncertainty surrounding fiat currencies, mostly due to the stimulus packages from the world’s central banks, has also made stablecoins such as Tether attractive to traders. With an easy way out of Bitcoin, Ethereum, and the like, USDT offered most a hedge against fiat currencies. 

This theory is backed by other data, as well, with most coin trackers showing that other stablecoins have also seen huge increases in market capitalizations. 

Graph showing the market capitalization for major stablecoins from December 2019 to March 2020

(Source: CoinMetrics.io)

The amount of USDT and USDC stablecoins currently held on exchanges has crossed $1 billion yesterday, data from TokenAnalyst showed. 

Graph showing the balance of USDC and USDT stablecoins held on exchanges in March 2020

(Source: TokenAnalyst)

While it’s still early to tell how this will affect the crypto market, the fact that market volatility tends to have a positive effect on stablecoins remains. We are yet to see whether the increase in exchange balances is a precaution taken by traders and the funds will re-enter the crypto market when more bullish signals appear. 

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