Table of Contents
- USDT’s Latest Milestone
- Increased Investor Interest
- Concerns Around USDT
The stablecoin Tether (USDT) has hit a significant milestone after its marketcap crossed $100 billion, further increasing the gap between its closest rival, USD Coin (USDC).
USDT’s Latest Milestone
According to a statement by Tether, USDT’s marketcap crossed the $100 billion mark. Its market capitalization also reached an all-time high of $100 billion momentarily on the 4th of March, according to data from CoinGecko. However, Tether has yet to cross the $100 billion mark on other data sources such as CoinMarketCap. The market capitalization fluctuates based on the current price and circulating supply. The surge in market cap has seen USDT post a 9% year-to-date growth, further increasing the gap between its closest rival, USD Coin. Currently, USDT is over $71 billion ahead of USDC, issued by Circle. USDC has also seen its market cap grow considerably this year.
Increased Investor Interest
Tether’s USDT stablecoin is designed to maintain a constant valuation of $1. It is often used to move funds in crypto without being exposed to the wild price swings of other cryptocurrencies. Recently, USDT has traded as high as $1.0020, indicating an increase in demand from investors who are betting on Bitcoin, which is seeing a significant surge, and using USDT to exchange fiat for crypto. Justin D’Anethan, the head of Asia Pacific business development at Keyrock, explained that traders were willing to pay a premium on the stablecoin to get their orders through despite Tether always being plagued by FUD.
“Traders were willing to pay a premium on Tether in order to get their orders through. Ironically, Tether has always been FUDed (plagued by anxiety about their legitimacy) as they resisted disclosing their reserves and balance sheet for years. Nonetheless, they’ve been around and stood the test of many volatility events from 2017 up to now, and an overwhelming majority of cryptocurrency pairs are denominated in USDT -which explains the premium in times of massive bull runs and enthusiasm for the crypto space.”
According to CoinMarketCap, $124 billion of USDT had changed hands during the past 24 hours.
Concerns Around USDT
USDT is the third-largest cryptocurrency behind Bitcoin and Ether, playing a crucial role as an option for traders looking for a stable asset. Tether claims that each USDT token is backed 1:1 with independently audited reserves made up of yield-bearing US Treasury Bills. Tether posted a record quarterly profit of $2.85 billion in Q4 2023, of which $1 billion came from US Treasury Bills. The company disclosed its Treasury Bills holdings of over $80 billion in its fourth-quarter report.
However, the quality of assets that back the USDT stablecoin has always been a cause for concern in the crypto ecosystem. To address this, Tether has made considerable efforts to reduce its exposure to assets that were deemed high-risk. In 2022, the company pledged to stop lending funds from its reserves by the end of 2023. However, at the end of 2023, the company had around $4.8 billion worth of loans on its books. This figure is $1 billion less than what it was at the beginning of the year. On its part, Tether has stated that the loans are fully collateralized and has promised to cut them down to zero in 2024.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
