Tether Surges as Other Stablecoins Decline in Market Share

According to the report, the USDT is now backed by 85 percent cash, cash equivalents, and short-term deposits.

Tether Surges as Other Stablecoins Decline in Market Share
Tether Surges as Other Stablecoins Decline in Market Share

The dominance of stablecoins pegged to the U.S. dollar on the market has shifted over the past year. According to CoinGecko data, Tether has climbed back to its all-time high, while the majority of cryptocurrencies are experiencing a decline.

In the past year, Circle’s USD Coin market share has decreased from 34.88 percent to 23.05 percent as of the time of writing.

In the same period, Binance USD market participation fell from 11.68% to 4.18%, while Dai’s participation rate remained at 3.66%, down from 4.05% in May 2022.

Tether’s USDT is exhibiting a divergent trend. The current market share of stablecoins is 65.89%, up from 47.04 percent a year ago.

Its market capitalization increased to $83.1 billion, while the USDC market capitalization decreased from $55 billion to $29 billion.

In a recent interview with Bloomberg, Circle CEO Jeremy Allaire attributed the stablecoin’s declining market capitalization to the United States’ regulatory crackdown on cryptocurrencies.

Current conditions in the United States appear advantageous for Tether.

Tether Surges as Other Stablecoins Decline in Market Share
USD Stablecoins by Market Dominance. Source: CoinGecko.

The U.S. banking crisis led to USDC depegging in March as $3.3 billion in reserves was stranded at Silicon Valley Bank, one of three crypto-friendly banks closed by regulators.

Despite Circle’s assurances, the market swiftly reacted to the news, resulting in USDC decoupling from the dollar.

Stablecoins have become popular as the connection between the crypto space and traditional finance has grown.

A recent report by the European Systemic Risk Board emphasized the need for greater transparency in the market for digital assets, particularly stablecoin reserves.

In recent years, Tether has been heavily criticized for its lack of transparency.

The crypto firm, owned by Hong Kong-based iFinex, was fined $18.5 million by the New York Attorney General’s Office in 2021 for allegedly misrepresenting the fiat backing for its reserves.

The stablecoin issuer was also required to provide greater financial transparency as part of the settlement.

The leadership of Tether has responded to the damaging allegations made on Twitter. In addition, the company is attempting to reduce its exposure to the banking system due to Silicon Valley Bank’s failure.

According to its most recent audit report, Tether withdrew more than $4.5 billion from banks in the first quarter of 2023, resulting in a “substantial reduction” in counterparty risk amidst continuing global economic uncertainty.

Additionally, the company increased its holdings of U.S. Treasury bills to a record high of over $53 billion, or 64% of its reserves.

According to the report, the USDT is now backed by 85 percent cash, cash equivalents, and short-term deposits.

Circle has adopted a similar strategy. According to reports, the stablecoin operator adjusted its reserves to mitigate risk in the face of macroeconomic uncertainty and no longer holds Treasuries with maturities beyond early June.


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