Stable Crypto… Competition and the Desire to Replace Tether (USDT)

Stable Crypto… Competition and the Desire to Replace Tether (USDT)

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Answer Stable Crypto… Competition and the Desire to Replace Tether (USDT)

The cryptocurrency market has a dominant stablecoin, which accounts for the majority of stablecoin transactions today.

Digital Dollar, or “Tether,” aims to keep its token (called Tether or USDT) at par with the US dollar by backing each digital dollar with $1 in bank deposits, and it represents the vast majority of the stable market by total value, exchange volume and other metrics.

But signs of concern are emerging about digital dollars or “tethers” due to the lack of legal references, with focus on the company’s access to banking services and its claims that it has full guarantees on the supply of digital dollars or “tethers” on hold.

The USDT digital dollar has not traded at $1 with any consistency since early October. It recorded its lowest level at $0.85 on October 15, and while the exchange rate has recovered to a large extent, it is still far behind the target level, as USDT is now trading at $0.98According to CoinMarketCap data.

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Meanwhile, several competing stablecoins have appeared in the market, including – just since September – the US Dollar (USDC), Paxos Standard Token (PAX) and Gemini Dollar (GUSD). In addition to the old competitors TrueUSD and its symbol (TUSD) and Dai and its symbol (DAI).

As one might expect in such a perfect storm, the “digital dollar or tether” has been losing some market share to these competitors in the week and a half since it broke the dollar barrier. However, the data indicates that TUSD and USDC have had the biggest successes, the data does not show a clear winner at this point who managed to capture a significant share, and Tether is still firmly on top.

All of these currencies are vying for a crucial role in the cryptocurrency industry ecosystem. In theory, stablecoins allow traders to transfer funds between cryptocurrency exchanges securely – without having to rely on access to traditional banking services. It also allows traders to transfer their funds to less risky assets in times of extreme volatility, without having to withdraw funds from the platform.

Below we’ll start digging into this data.

Market value

There are several ways to measure market share in the field of stablecoins, and perhaps the most important is simply by looking at the market value, which must be equivalent to the reserve, which means that there are 100 stablecoins that must be matched by 100 coins in the reserve account, and it should be approximately Same as the total (gross) width.

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“Tether has inevitably lost market share in terms of the supply of dollars that have been allocated to various stablecoins,” said Blockchain developer Nick Carter. He added that both TUSD and USDC were the “main beneficiaries”.

In fact, according to CoinMetrics analyzed data, the market capitalization of the cryptocurrency market as a proportion of the broadly stablecoin market has been steadily declining, with most of this decline coming from a decrease in the supply of Tether (token market capitalization equal to its price multiplied by total supply) .

Referring to a period in mid-October when the Tether exchange rate fell below $0.93 according to CoinMarketCap, Carter said: “The digital dollar (Tether) made up about 94% of the total cryptocurrency market at the time, but it collapsed to 83% after launch. ”

But it is important not to exaggerate the competitive implications of this breakdown. The main reason for this shift is that Bitfinex – a trading platform and partner in the Tether project – has sent $780 million to the company-controlled wallet known as Tether Treasury since October 14.

This process, which the (controversial) company refers to as “redemption,” removes cryptocurrencies from supply and thus reduces the market value, which has fallen to about $1.9 billion from a peak of about $2.8 billion in September.

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Hence, the weak supply of the digital dollar “tether” has not benefited the two competing stablecoins as much as they can be assumed, Carter noted. “It appears that some of the USDT that has been redeemed is, in fact, not flowing to other competitors, but the liquidity is simply out into BTC or fiat.”

the size

Another way to measure stable market share is to look at what is happening with cryptocurrency exchanges.

Unsurprisingly, during and shortly after the tether incident, a number of cryptocurrency exchanges — including OKEx and Huobi — raced to list alternative stablecoins.

However, CoinMetrics data shows a slight increase in trading volume for tether pairs over the course of October, and from a small base (note that the vertical axis ranges from 96% to 100%, and the rope remains clearly dominant in this metric):

“The trading volume of competing digital stablecoins is small because traders are not used to them yet,” Carter said, adding that “the digital dollar (tether) is still a suitable (albeit risky) option for a trader to take calculated risks….”

But there is one more metric to consider: The volume of transactions on the blockchain of these stablecoins.

Through the yardstick you can see that the alternatives to tether are becoming more advanced. Compared to modest trading volumes, the total transaction volumes on the blockchain were significantly higher relative to stablecoin prices (excluding Tether) throughout the month, and appear to have increased after Tether broke the dollar:

After all that said, the “tether” or “digital dollar” is still dominant, but the competition is becoming more and more intense lately with its new competitors.

According to “Carter”: “It is still too early to determine which competitor is able to capture the largest share of the digital dollar (tether).”

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