The race to replace Tether (in 3 charts)

The crypto market has a dominant stablecoin, make no mistake.

Tether, which aims to keep its token (called Tether or USDT) at par with the U.S. dollar by backing every token with $ 1 in bank deposits, makes up the bulk of the stablecoin market by total value, exchange volume, and other metrics out.

But the market has started to show signs of fear regarding Tether, centered around the company’s access to banking services and its claims to have fully collateralized the pending Tether offering.

The token has not been constantly trading at $ 1 since the beginning of October. It hit a low of $ 0.85 on a market on October 15, and although the exchange rate has largely rebounded, it is still below target, trading at $ 0.99 on Sunday, according to CoinMarketCap.

In the meantime, several competing stablecoins have hit the market, including – only since September – Circles USD Coin (USDC), the Paxos Standard Token (PAX) and the Gemini Dollar (GUSD). Older competitors are TrueUSD (TUSD) from TrustToken and Dai (DAI) from Maker.

As you’d expect with such a perfect storm, Tether has lost some market share to these competitors in the week and a half since it broke the money, as data analyzed by CoinDesk shows. While TUSD and USDC have made the greatest strides, data does not show a clear winner at this point and the tether remains firmly on top.

All of these coins vie for a critical role in the crypto ecosystem. In theory, stablecoins allow merchants to move money quickly between exchanges – without relying on access to traditional banking. They also allow traders to convert their funds into a less risky asset during times of increased volatility without having to withdraw money from an exchange.

We’ll dive into the data below.

Market capitalization

There are several ways to measure stablecoins market share, none of which are perfect indicators. One is simply by looking at its market cap, which if the asset is to trade 1 to 1 with fiat it should roughly equal the total supply.

“Tether has definitely lost market share in terms of providing USD allocated to various stablecoins,” Nic Carter, creator of blockchain data site Coinmetrics, told CoinDesk. TUSD and USDC are “the main beneficiaries”.

According to Coinmetrics data analyzed by CoinDesk, Tether’s market cap as a share of the broader stablecoin market has steadily declined, with most of that decline being due to a decrease in Tether supply (a token’s market cap is its price multiplied by its by Total supply).

Charts by Nolan Bauerle and Peter Ryan from CoinDesk Research. Data for all charts comes from Note that the scaling of the vertical axes differs between the diagrams.

“Before the run,” said Carter, referring to a period in mid-October when Tether’s exchange rate fell below $ 0.93, according to CoinMarketCap, “Tether accounted for about 94 percent of the total supply of stablecoins; after the run that fell to 83 percent. “

But it is important not to overestimate the competitive impact of this collapse. The main reason for this postponement is because Bitfinex – a cryptocurrency exchange that executives and owners shares with Tether – have transferred USDT 780 million to a company-controlled wallet called Tether Treasury since Oct. 14.

This process, which the company (controversially) calls “redemption,” removes tokens from the offering, reducing market capitalization from a high of nearly $ 2.8 billion in September to around $ 1.9 billion has decreased.

Hence, the tether supply reductions have not benefited competing stablecoins as much as one might assume, noted Carter. “It looks like some redeemed USDT actually did not flow into other competitors, but simply exited to BTC or Fiat.”


Another way to measure stablecoin’s market share is to look at what’s happening on cryptocurrency exchanges.

Unsurprisingly, during and shortly after the run, a number of exchanges – including OKEx and Huobi – rushed to list alternatives to Tether.

However, Coinmetrics’ data shows only a slight increase in trading volume for tether alternatives over the course of October and from a tiny base (note that the vertical axis goes from 96 to 100 percent and tether remains clearly dominant on this metric):

Stablecoin exchange volume

Coinmetrics exchange volume data is sourced from CoinMarketCap.

“The exchange volume is low on alternatives because traders are not really used to it yet,” said Carter, adding, “Tether is still considered a useful (if risky) coin for traders to take on fiat-denominated risks. It just has the accumulated financial infrastructure. “

But there is another metric to consider: the transaction volume on the blockchains for these stablecoins.

By this benchmark, tether alternatives have made more progress. Compared to modest exchange volumes, total transaction volumes in the chain for non-Tether stablecoins were significantly higher over the month, and they appear to have increased after Tether broke the money:

Onchain transaction volume tether stablecoins

All in all, Tether is still dominant, but competition from its many rivals is intensifying.

According to Carter, “however, it is too early to say which competitor is best positioned to win over the long term.”

Tether image via Shutterstock

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