Tether (USDT) is a token and a StableCoin that trades on exchanges at a value of exactly $1.00. Bitcoin is a decentralized crypto today trading at around $8000.
Yet, Tether is beating Bitcoin in trading volumes, and Bitcoin is hoping for more of that, as its own survival may depend on Tether doing well.
Tether vs Bitcoin: and the winner is…
What’s the world’s most widely used cryptocurrency? Bloomberg says Bitcoin accounts for about 70% of all the digital-asset world’s market value, but according to data from CoinMarketCap.com still lags Tether (Tether’s market cap is over 30 times smaller than Bitcoin) in terms of the highest daily and monthly trading volume.
Tether’s volume surpassed that of Bitcoin’s for the first time in April and has consistently exceeded it since early August at about $21 billion per day, or 18% higher, the data provider says.
What is Tether?
Tether has been around since 2014 and is the world’s most used stablecoin, a category of tokens that seek to avoid price fluctuations, often through pegs or reserves.
Tether was used in 40% and 80% of all transactions on two of the world’s top exchanges, Binance and Huobi, respectively, Coin Metrics said earlier this year.
Tether’s Market Cap Image
The way Tether is managed and governed makes it a black box. Tether is issued by a Hong Kong-based private company whose proprietors also own the Bitfinex crypto exchange.
The exact mechanism by which Tether’s supply is increased and decreased is unclear. Exactly how much of the supply is covered by fiat reserves is in question, too, as Tether is not independently audited. In April, Tether disclosed that 74% of the Tethers are covered by cash and short-term securities, while it previously said it had a 100% reserve.
Tether aims to allow traders to convert their cryptocurrencies into a stable and is primarily used as a way to realize gains and get in and out of volatile crypto-asset positions, also explaining the high volume of trade.
Bitcoin rally tied to Tether
It’s becoming a little clearer just how much the stablecoin Tether contributed to the rally that saw Bitcoin more than double in value this year.
On days that new Tether tokens are issued, Bitcoin increases in price as much as 70% of the time, researcher TokenAnalyst calculated. Since about $2 billion of Tether was issued this year, it was likely a significant factor.
Tether can come into circulation on a number of digital ledgers, or blockchains, and the origin matters. Following the issuance of Tethers on the Ethereum blockchain, as so-called ERC-20 tokens, the price of Bitcoin moves up 70% of the time, TokenAnalyst found.
The Tether data could make it easier to predict future price moves for Bitcoin or other cryptos.
Tether has just minted an additional 20 million USDT. Evidence presented by the Blockchain Transparency Institute suggests that only 36% of trading supposedly conducted using USDT is genuine, and Tether’s is one of the main reasons why regulators regard cryptocurrencies with a wary eye and have put the breaks on crypto exchange-traded funds (ETFs) amid concern of market manipulation.
But will this latest Ether mining activity inflate the price of Bitcoin?
Recently, Tether added an additional 15 million USDT immediately following Bitcoin’s sudden crash to below $10,000.
BTC traded at the start of this year at around $3,800. Months of sideways price action later, it eventually shot upwards in a rally that took its price to just shy of $14,000 this June.
The USDT/BTC is one of the most popular Bitcoin trading pairs as well.
With Tether’s monthly trading volume about 18% higher than that of Bitcoin, it’s arguably the most important coin in the crypto ecosystem.