In the past 18 months, Tether (USDT) stablecoin has been the main basic trading pair of cryptocurrencies.
Considering the ongoing court case between Tether and the New York Attorney General, as well as other rumors that USDT does not have sufficient reserves or is not supervised by relevant agencies, this is a pretty impressive achievement.
It is worth noting that competitors such as USD Coin (USDC), TrueUSD (TUSD) and Paxos Standard (PAX) had a total capital of US$520 million in June 2019. During the same period, the market value of USDT has exceeded $3.1 billion.
In the past 15 months, Tether’s market value has increased to $15.7 billion, while the market value of its four major competitors is $4.1 billion. Regardless of whether USDT has sufficient US dollar reserve support, USDT occupies nearly 80% of the market share of all legal currency-backed stablecoins.
Almost the same situation appeared in terms of transaction volume, with Tether dominating with a 75% lead.
Base cryptocurrency transaction volume Source: CryptoCompare
According to data from CryptoCompare, USDT accounted for nearly 73% of the market share in the past three months. Before further investigation, it should be pointed out that the data will vary according to different data providers, because some exchanges are often excluded due to lack of transparency.
Despite some differences, Constantine Tsavliris, Head of Research at CryptoCompare, explained:
“In terms of converting Bitcoin into USDT or other similar stablecoins (such as USDC or PAX), we found that the transaction volume has not changed significantly.”
The stablecoin channel has nothing to do with the price of Bitcoin
Most traders have become accustomed to using Bitcoin (BTC) as the main channel of cryptocurrency. For most traders in 2017 or 2018, this may be the only solution, or at least the most liquid, but as the stablecoin market grows, the trading volume of USDT trading pairs for altcoins has soared.
With the increase in stablecoin trading volume, the issuance of altcoins and stablecoin trading pairs has become more widespread. This trend has accelerated as Coinbase, Huobi and Binance launched their own stablecoins.
It would be wrong to think that the declining use of Bitcoin as the main entrance to cryptocurrency is harmful to the price of Bitcoin. Those who used Bitcoin as a trading tool to obtain Bitcoin may have increased Bitcoin’s transaction volume, but later sold it in the same amount in exchange for altcoins.
In addition, even if stablecoins are used as the main entry solution, eventually, part of the traffic will overflow to Bitcoin. Moreover, most crypto assets are not direct competitors of BTC’s value storage and scarcity.
Inflow and outflow of Chainlink in the past 24 hours Source: Coinlib.io
For example, the figure above shows that the outflow of funds from Chainlink (LINK) to BTC in the past 24 hours was 26.6 million USD. The remaining altcoins also showed a similar trend, which shows that Bitcoin has not reduced transaction volume because stablecoins have become the main basic trading pair.
By analyzing the trading volume of the cryptocurrency market, one can determine whether stablecoins are increasing the overall market share or just taking away Bitcoin’s market share.
7-day average trading volume of the crypto market Source: TradingView
Even for traders who have experienced the bubble at the end of 2017, the above chart may be surprising. The daily average peak of USD 36.6 billion in January 2018 may be too high at the time, but it is still quite low compared to the current level of USD 100 billion.
Regardless of whether the false transaction volume will affect this view, we can see that, proportionally, the transaction volume has increased considerably. This increase in transaction volume coincides with the issuance of stablecoins, which have increased from US$3.6 billion in June 2019 to the current US$18.9 billion.
Trading volume advantage is a key factor
MicroStrategy co-founder and CEO Michael Saylor believes that the main use of BTC is a reserve currency. Therefore, it cannot compete with tokens such as Ethereum (ETH) and stablecoins.
Unlike traditional Bitcoin dominance data based on market capitalization, Saylor’s analysis only includes tokens based on a proof-of-work mechanism.
Even when comparing Bitcoin’s trading volume with a wider range of assets, when analyzing transparent trading volume, it is comparable to the sum of the top 20 altcoins.
Considering the above data, it can be said with certainty that stablecoins are not competitors of Bitcoin in terms of market value or quantity.
Tavliris explained that he believes this is because:
“For the top altcoins of the past few months, trading volume does not necessarily leave the Bitcoin market. The USDT market is attractive because they usually provide Better liquidity.”
