Investors are fleeing from Tether (USDT), says on-chain data. The stablecoin giant, as a result, has lost significant market share amid a slew of market corrections.
Tether’s loss of market share
Tether currently sits at a market cap of $68 billion, the lowest since October last year, down from the recently set all-time high of $83 billion. Since then, the stablecoin has suffered a cascade of repeated declines. According to data from CoinGecko, it has recently lost around $4 billion since June 14 alone.
TerraUST’s collapse pushed market players to seek sanctuary in other digital assets that maintain a one-to-one peg with the USD. As a result, the ensuing market contagion drove crypto and stablecoins to wobble, during which USDT briefly lost its dollar parity as it plunged to 95 cents.
Although it managed to re-anchor itself quickly, the death spiral led many investors to abandon the stablecoin giant for its rival – USDC, one of the main contenders. Upon further investigation, it was found that unlike the market cap drop of USDT, Circle’s flagship stablecoin continued to follow an upward trajectory.
After topping out in the first week of March, USDC’s market cap quickly bounced back in mid-May. As reported earlier, it even went on to become the stablecoin of choice on the Ethereum blockchain.
Meanwhile, Binance USD (BUSD) also noted a minor but relevant bounce. With the demise of TerraUSD, the three largest stablecoins – Tether, USD Coin, and Binance USD – managed to retain their position in the top ten of the rankings.
Tether’s shrinking market cap comes days after it refuted rumors that the stablecoin is largely backed by Chinese and Asian commercial paper. Regarding the recent events impacting the crypto lending platform, Celsius, the stablecoin issuer stated,
“Celsius’ position was liquidated without any loss to Tether. Tether’s lending activity with Celsius (as with any other borrower) has always been over-collateralized. Tether currently has no exposure to Celsius except for a small investment made from Tether’s shares in the company. Tether is aware of other rumors spreading, suggesting he has loan exposure at Three Arrows Capital – again, that’s categorically untrue.
Separately, Tether’s CTO – Paolo Ardoino – outlined an attack against the company’s servers, but reassured that it was not successful.
Stable economy
While other dollar-pegged tokens could eat into Tether’s share, for the first time in history, the total supply of stablecoins as a whole fell sharply in Q2 2022 (excluding UST). Lucas Nuzzi, Head of Research and Development at CoinMetrics revealed that stablecoin redemptions have increased massively due to short-term liquidity and insolvency concerns.
Of all centralized issuers, Tether witnessed the most redemptions, wiping approximately 7 billion of its supply in the past month, as investors attempted to pull out from the market and avoid any further damage.
Nevertheless, the rapid decline in prices of all non-stable crypto assets means that stablecoins have increased in terms of market capitalization and placement. Recent Data shows that there are four such digital assets in the top 10 cryptocurrencies, and the fifth is also on the way.
