USDT Market Share Increases Amid Market Uncertainty

Over the past year, there have been some changes in the market domination of stablecoins linked to the US dollar. Data from CoinGecko reveals that Tether (USDT) has returned to its all-time high while the majority of them are in a declining trend.

Source: CoinGecko

Circle's USD Coin (USDC) has suffered a fall in market share over the last 12 months, going from 34.88% to 23.05% at the time of writing. Binance USD (BUSD) market participation fell from 11.68% to 4.18% during the same time period, while Dai's DAI market share was at 3.66%, down from 4.05% in May 2022.

In the meantime, USDT from Tether is advancing. The stablecoin now commands 65.89% of the market, up from 47.04% last year. While USDC's market cap has decreased from a high of $55 billion to merely $29 billion, its market cap has skyrocketed to $83.1 billion.

In a recent interview with Bloomberg, Circle CEO Jeremy Allaire attributed the stablecoin's decreasing market capitalization to the regulatory crackdown on cryptocurrencies in the US. The situation in the United States right now seems to be favorable for Tether.

USDC depegged in March as a result of the U.S. banking crisis because Silicon Valley Bank, one of three crypto-friendly banks that regulators closed down, had funds worth $3.3 billion trapped there. Despite Circle's promises, the market reacted to the news right once and USDC's peg to the dollar was broken.

Stablecoins have grown in popularity as the relationship between the crypto world and conventional banking has grown. The European Systemic Risk Board recently published a paper that emphasized the need for greater openness in the market for digital assets, particularly for stablecoin reserves.

Over the years, Tether has received harsh criticism for its lack of transparency. The crypto company, which is owned by Hong Kong-based iFinex, was penalized $18.5 million by the New York Attorney General's Office in 2021 for allegedly misrepresenting the fiat backing of its reserves. The stablecoin issuer was also compelled to show more financial transparency as part of the settlement.

The Tether leadership has retaliated against the false claims made on Twitter. In addition, in light of Silicon Valley Bank's demise, the corporation wants to lessen its exposure to the banking sector. According to its most recent audit report, Tether withdrew more than $4.5 billion from banks in the first quarter of 2023, which resulted in a "substantial reduction" in counterparty risk despite the persisting economic unpredictability around the world.

Additionally, the business increased its holdings of US Treasury bills to a record high of over $53 billion, or 64% of its reserves. According to the research, the USDT is currently 85% backed by cash, cash equivalents, and short-term deposits when combined with other assets.

Circle has taken similar action. According to reports, the stablecoin operator reduced risk in the wake of macroeconomic uncertainties by adjusting reserves and no longer owns Treasurys with maturities later than early June.