Despite the March 50% dump of Bitcoin, the supply volume of the stable Tether USDT coin is growing rapidly.
According to aggregators, the market capitalization of the asset has recently exceeded $ 6 billion, while over the past two weeks alone, this figure has grown by $ 1 billion. In an industry with a capitalization of less than $ 200 billion, such injections cannot go unnoticed.
According to Unfolded, March 27 Tether capitalization exceeded $ 6 billion
In addition, the alternative stablecoin market is Paxos Dollar, USD Coin, Binance USD, etc. - also growing recently.
Two questions arise:
- What determines the demand for stable coins?
- How will an increase in the stablecoin market affect the dynamics of Bitcoin?
Why Tether Market Capitalization Is Growing
Former institutional investor who became CEO of the FTX cryptocurrency Alameda fund, Sam Bankman-Fried explained the USDT market growth phenomenon by three factors:
- OTC traders, “mainly from Asia,” are actively buying USDT. Although Bankman-Fried did not provide evidence for this assumption, it is well known that Chinese traders use Tether because they cannot access cryptocurrencies in any other way. Some observers also note that USDT is a convenient way to move assets around the world, even if you do not use other cryptocurrencies.
- People sell Bitcoin for USDT to “hedge positions”.
- People sell Bitcoin for USDT to “reduce risks.”
Is Tether Market Growth a Bullish Signal for Bitcoin?
Most of the demand for USDT is due to the growth in BTC sales, and not the activity of investors who want to buy cryptocurrencies through stablecoin. Despite this, the USDT market growth could be a catalyst for the BTC bull rally in the future.
For example, digital asset manager Charles Edwards earlier this year noted that “over the past 1.5 years, major changes in Tether’s market capitalization have affected the value of BTC”:
This assumption was confirmed when, by mid-February, the BTC rate jumped to $ 10,500 after the next major release of stablecoin a month earlier.
