Tether’s stablecoin USDT dominates the trading volume of the crypto market but data shows that its $ 15.7 billion capitalization has no effect on Bitcoin’s volume.
Tether’s stablecoin has been the leading underlying trading pair for cryptocurrencies for over eighteen months.
This is quite an impressive achievement given the ongoing trial with the Attorney General of New York and other frequent rumors that USDT is not fully backed by USD or within the reach of regulators.
USDT is also the dominant stablecoin in China even though the country banned cryptocurrency exchanges in 2017. This is because major exchanges like Binance, Huobi and OKEx have turned to stablecoins as muscle pairs. their top department.
It is also worth noting that competitors such as USD Coin (USDC), TrueUSD (TUSD) and Paxos Standard (PAX) have a total capitalization of $ 520 million in June 2019. Over the same period, USDT has accumulated. cumulative market cap is greater than $ 3.1 billion.
Over the past 15 months, USDT’s market cap has risen to $ 15.7 billion, while its four biggest competitors have only reached $ 4.1 billion. Despite all the dollar-backed controversy, USDT has almost 80% market share of all fiat-backed stablecoins.
A similar story is recorded in trading volume, where Tether dominated the lead with a rate of 75%.
Volume of Cryptocurrencies Consolidated by Base Pair | Source: CryptoCompare
Data from CryptoCompare shows that USDT holds almost 73% market share of trading volume over the past three months. Before doing any further research, it should be noted that the numbers will vary by data provider, as some exchanges are often excluded due to lack of transparency.
Despite these deviations, CryptoCompare Head of Research, Constantine Tsavliris, explained that:
“Regarding trading BTC / USDT or other equivalent stablecoins like USDC or PAX, we haven’t seen a significant change in volume yet.”
An on-ramp stablecoin has nothing to do with Bitcoin price
Most traders are used to using Bitcoin as the primary gateway for cryptocurrencies. This solution may be the only one, or at least it has the highest liquidity for most traders in 2017 or 2018, but as the stablecoin market grows, the volume of altcoins paired with USDT skyrockets. .
The wider offering of altcoin pairs entailed higher volumes of stablecoins, and when Coinbase, Huobi, and Binance launched their own stablecoins, the trend rose sharply.
It would be a mistake to infer that Bitcoin’s increasingly diminished use as a primary vehicle for cryptocurrencies would be detrimental to its price. Bitcoin buyers may have increased volume, but used the same amount to sell it later in exchange for altcoins.
Furthermore, even if one uses stablecoins as the leading solution, part of this flow will eventually flow to Bitcoin. Furthermore, most crypto assets are not direct competitors to Bitcoin’s value propositions and scarcity.
LINK in / out flows over the past 24 hours | Source: Coinlib.io
For example, the chart above shows a cash flow of $ 26.6 million from LINK to Bitcoin over the past 24 hours. A similar trend happened with the rest of the altcoins, confirming that Bitcoin did not lose volume as the stablecoin established itself as the dominant base pair.
By analyzing the aggregate cryptocurrency market volume, one can determine whether the stablecoin is increasing its overall market share or simply taking it away from Bitcoin.
7-day average volume (billion dollars) | Source: TradingView
The chart above is probably staggering even for traders who experienced the late 2017 bubble. January 2018 average daily peak of $ 36.6 billion could be overkill at the time. But it’s rather tiny compared to the current $ 100 billion level.
Regardless of whether the spurious mass influences this observation, we can see that, proportionally, there has been a significant increase. This volume growth coincided with stablecoins issued from $ 3.6 billion in June 2019 to current $ 18.9 billion.
Volume dominance is the main factor
Michael Saylor, co-founder and CEO of MicroStrategy believes Bitcoin’s primary use for reserve currency. Therefore, it does not compete with tokens like ETH and stablecoins.
Unlike traditional Bitcoin dominance data based on market cap, Saylor’s analysis includes only proof of work (POW) coins.
Even comparing Bitcoin’s volume to a broader asset base, it matches a total of the top 20 altcoins for a transparent volume analysis.
30-day cumulative transparent trading volume (USD) | Source: Nomics
Keeping in mind the above data, it can be safe to say that stablecoins are not a rival to Bitcoin in terms of volume or market cap.
Tsavliris explains that:
“For the top altcoins over the past few months, volume has not necessarily moved away from the Bitcoin market. Instead, they are offered and used in tandem with the USDT marketplace. USDT markets are attractive because they often offer liquidity that outperforms the Bitcoin market on exchanges most.