The world’s largest stable coin market capitalization has increased despite threats from US regulators.
Tether Holdings Ltd, which issues the world’s largest stable coin Tether (USDT), said its total market capitalization has exceeded USD 64 billion for the first time in history.
The company called the event a “significant milestone”, adding that it is another sign that the cryptocurrency market “continues to trust and believe” in stablecoin.
In detail, Tether’s business model is focused on providing digital dollars to cryptocurrency traders and investors.
The company thus offers them the possibility to store their volatile digital assets in USDT, a digital asset that is equal in value to the US dollar.
In this way, Tether has helped cryptocurrency traders and investors avoid the hassle of transferring the proceeds of digital asset sales to a bank account.
The company’s business model has strengthened its position in the cryptocurrency industry to such an extent that trading between Bitcoin (BTC) and USDT is typically twice as large as trading between Bitcoin and USDT.
Pre-configuring a cryptocurrency request
A Tether spokesperson previously explained that the new USDT issuance was made to meet customer orders.
The increase in USDT market capitalization, therefore, suggests that traders and investors may wish to purchase stablecoins and invest them in digital assets such as bitcoins and ethereum (ETH) and/or place them in contracts with increasing yields to make an annual profit.
Rising peg rates usually coincide with a jump in the bitcoin market. For example, in March 2020, the total market capitalization of USDT was around USD 4 billion, rising to over USD 61 billion in May 2021.
At the same time, the value of Bitcoin rose from less than USD 4 000 to almost USD 65 000.
Moreover, Bitcoin’s correction from USD 65 000 to USD 30 000 coincided with a fall in Tether’s market capitalization.
BTC later recovered thanks to renewed support from Tesla CEO Elon Musk and Twitter CEO Jack Dorsey, as well as concerns about rising inflation due to the US Federal Reserve’s easy money policy.
Meanwhile, 20% of Tether’s shares are currently locked in smart contracts in the decentralized financial project, Glassnode reports.
“I predict that Tether will continue to ‘print’ (Mining) more and more Tether as the cryptocurrency industry continues to grow.”- Gustavo De La Torre, director of business development at N.exchange, noted that a potential market boom could happen in the coming sessions.
“The increasing supply shows that the cryptocurrency ecosystem believes in its system, creating the opportunity to pair exchanges with assets other than the US dollar.”
Trading activity
In June, analysts at JP Morgan pointed out that the large amount of commercial paper held by Tether suggests that banks are reluctant to accept cash from the company.
This may be due to the OCC guidelines which instruct banks to deal only with stablecoin issuers whose coins are 100% backed by reserves.
The banking giant added that offering banking services to Tether “may raise reputational concerns for financial institutions”.
However, Tether’s general counsel Stuart Hogner condemned JP Morgan’s forecast, saying.
“In terms of reputation, we believe we are seeing the opposite – more and more counterparties are happy with Tether and our transparency initiatives and are happy to do business with us.”
Regulatory scrutiny
Tether’s US$64 billion milestones comes at a time when stablecoins, in general, are attracting increased regulatory scrutiny.
The US Treasury, Securities and Exchange Commission, and Federal Reserve have expressed concern that dollar-based digital assets could cause global financial instability and mask transactions linked to money laundering and other online criminals.
However, De La Torre argued that cryptocurrency traders are ignoring the regulatory threats to the viability of stable coins as a product. He said.
Tether will remain relevant to the rest of the world.” “If regulatory pressure increases, other well-regulated stable coins like USDC could dominate the US market.
Everest CEO and co-founder Bob Reid also highlighted Circle USD Coin’s attempt to conquer the US market by demanding a national debit card.
The CEO said that Tether may follow a similar path to gain legality in the US or it may be removed from the country altogether.
Tether is in danger of following the same path as Binance – the oppressed nomad hated by half the world’s governments,” he told Cointelegraph.
