The popular stablecoin Tether (USDT) has also been seeing its growth slowing down after being extremely strong at the beginning of the coronavirus-related lockdowns.
This year, a relatively steady rate of growth pushed Tether supply from about 5 billion to 9 billion before last week. However, in the past weeks, Tether supply growth has slowed considerably but is still positive.
This growth finally has Tether surpassing the $10 billion market capitalization. According to Messari, the USDT market cap has now reached $10.2 billion. However, as per Tether Transparency, total assets are still at $9.79 billion, which could be because it is not including issued but not yet released Tether.
According to Kraken co-founder and CEO, Jesse Powell, “Tether is sort of a beta version of the tokenization of national currency that a lot of countries are looking into.”
Tether is becoming part of the everyday's life of thousands of people. Not anymore only for crypto enthusiasts. It is just useful, highly available and makes life easier.
So much positive feedback.
— Paolo Ardoino (@paoloardoino) June 28, 2020
Tether supply on DeFi project Compound Finance has also been recording growth, with the total supply rising to $80.55 million with supply and borrow rates for USD currently being 3.56% and 10.96%, respectively.
Arbitrators & Chinese Whales Using USDT
Earlier this month, Matthew Graham, CEO of Beijing-based Sino Global Capital, shared that a lot of demand for Tether is from the enormous market of over-the-trading brokers in China, which is “far bigger than people think.” And USDT is the “crux” of this flow used to hide BTC speculation because the trading of the digital asset isn't exactly encouraged by the government.
“Most people have no idea how much demand there is for USDt in Asia. It’s been like this for years now,” said Samson Mow, CSO at Blockstream.
OTC transactions with USDT are a sensitive topic but an ‘open secret’ in China. These OTC desks cater to bitcoin whales that include high-net-worth individuals and institutional traders, Graham said. It could also be what has been “dampening” an appreciation in bitcoin price, he said.
The Flipside Crypto’s data also reveals that most of the USDT used on centralized exchanges are for arbitrage. Traders profit from price differences across exchanges by first sending their USDT to their wallet before sending it to a different exchange. Most of this activity takes place between Binance, Huobi, and Bitfinex.
Rise of Stablecoins
Stablecoin explosion started in the first half of 2020, which has been slowing down for some weeks now, but the major fat-pegged digital assets still surpassed $11 billion.
Meanwhile, the continued rise of stablecoins resulted in their adjusted transaction value surpassing that of Bitcoin for the first time last week.
Tether has already been keeping above Bitcoin for some time now, today while bitcoin recorded $1 billion in ‘real’ trading volume, $1.5 billion worth of USDT exchanged hands.
When it comes out different variants of Tether, the ERC-20 USDT is well distributed among its holders, unlike the TRX-based Tether which along with Gemini Dollar, Binance USD, USDK, and HUSD has their 80% of supply owned by just six or fewer accounts, stated a report of Coin Metrics from earlier this month.
Also, “the most active Tether on Tron accounts are linked to “dividend” payouts. In some days, this was responsible for 90+% of Tether on Tron transfers.”
Stablecoins for Financial Stability
Today, the US Senate Committee on Banking, Housing, and Urban Affairs is holding a hearing on “The Digitization of Money and Payments.” During the event, former CFTC Chair, aka ‘Crypto Dad’ J. Christopher Giancarlo and Paxos co-founder and CEO Charles Cascarilla, among others, will focus on stablecoin and central bank digital currencies (CBDC).
“The Digital Dollar Project believes the opportunity is at hand not just to imagine such an ecosystem, but to actually build it with such services for low-income and underbanked communities as priorities from the start,” he said in his pre-written testimony.
Meanwhile, the recent reports from the US Federal Reserve, Bank for International Settlements, and the Financial Stability Board have been talking about the risk of stablecoins. Their main concern is global stablecoins having the “potential reach and adoption across multiple jurisdictions and the potential to achieve substantial volume.”