Today, Reuters published an article by Medha Singh and Lisa Pauline Mattackal in which they bluntly state that the winner in the stablecoin market so far is Tether.
Indeed, looking at the changes in the market capitalization of the major USD stablecoins in these early weeks of 2023 USDT, or Tether dollar, clearly emerges as the one that has performed best.
Tether market capitalization
At the beginning of 2023, USDT’s market capitalization was about $66.2 billion, and remained so until mid-January.
However, after the start of the crypto markets’ small bull run in January, it picked up again, first rising to $67.8 billion at the end of the month, and then rising to over $70 billion in recent weeks.
However, this is not the highest level, because the all-time peak was reached in early May 2022, before the implosion of the Terra/Luna ecosystem, when it reached over $83 billion.
The current market capitalization of Tether is in fact only 15% below the all-time peak.
During 2022, it fell twice below $70 billion, namely in June, when it then also fell below $66 billion in the following month, and in November, when it fell slightly above $65 billion.
In other words, in 2022 it fluctuated between $65 billion and $83 billion, and then apparently settled back above $70 billion in this early 2023.
It is worth noting that in early 2021 it was only 21 billion, so the current level is almost three and a half times the pre-bubble level.
Capitalization of competitors
The main competitor is USD Coin, or USDC, whose market capitalization in 2023 fell from $44.5 billion to $40.9, only to rise again in recent days to $42.2. It has practically taken the opposite path of USDT, although its capitalization as of today is ten times that of early 2021.
In other words, USDC rose much more than USDT during the last big bull run, only to stop in June 2022.
The biggest problems though are with BUSD (Binance USD), as its issuer (Paxos) has announced that it will no longer issue new tokens.
In fact, during these first weeks of 2023 its capitalization has plummeted from $16.5 billion to $12.4 billion, although it is still more than ten times what it was at the beginning of 2021.
Thus, proportionally BUSD is among the major stablecoins that grew the most during the last big bull run, but now it is the one with the most problems.
It is worth noting that DAI, i.e., the fourth major stablecoin pegged to the US dollar, also saw its capitalization drop from $5.7 billion to $5.2 billion in this 2023.
Moreover, DAI is not a stablecoin collateralized in the underlying, but algorithmic, which in theory makes it a higher risk stablecoin.
The analysis by Reuters
Singh and Mattackal state that the world of stablecoins right now seems to have suddenly become shaky.
However, he points out that, overall, the impact of the BUSD and USDC problems on the stablecoin market has not been negative, because the total value has increased by $2 billion.
In other words, Tether alone has not only held up the entire stablecoin ecosystem, but has even managed to grow it.
The article also quotes the words of the CEO of the network of Bitcoin developers Hiro, Alex Miller, who says that there is too much demand for dollar-based stablecoins in the crypto markets for them to really do without.
He also cites the words of the head of research and strategy at cryptocurrency company Matrixport, Markus Thielen, that right now Tether is unambiguously winning.
Tether problems
This dynamic is surprising to a lot of people, because until a few months ago it was actually widely assumed that USDT was the one with the biggest problems.
To be fair, this was just speculation, because Tether has not shown any serious problems lately, but given the company’s sometimes turbulent past, such as the infamous $850 million blockchain in 2018, these assumptions were all the rage.
Moreover, Tether has been accused in the past, including by seemingly authoritative sources, of manipulating the crypto market by creating USDT out of thin air, but even these accusations were eventually simply brushed aside due to lack of evidence.
On the contrary, Tether over the past few months has been able to give evidence of full hedging of all USDT issued, and also show a marked change in its choice of assets to use as hedges, increasingly preferring solid ones such as US government debt.
At this point, it is hardly surprising that after a difficult 2022, USDT is back to being the stablecoin that dominates the crypto market, although USDC and BUSD continue to be widely in use especially in DeFi.
In case the old assumptions regarding USDT’s alleged problems have really faded away, a new era of sorts has probably opened for Tether.
