Tethers (USDT) stablecoin has been the leading base pair for cryptocurrencies for over eighteen months.
This is quite an impressive feat given the ongoing lawsuit with the New York Attorney General and the other frequent rumors that USDT is not receiving adequate support or is beyond the reach of regulators.
USDT was also the dominant stablecoin in China, despite the fact that the country banned cryptocurrency exchanges in 2017. This is because major exchanges like Binance, Huobi, and OKEx used the stablecoin as their leading base pair.
It’s also worth noting that competitors like USD Coin (USDC), TrueUSD (TUSD), and Paxos Standard (PAX) had a combined capitalization of $ 520 million as of June 2019. During the same period, USDT had already amassed a market cap of more than $ 3.1 billion.
Over the past 15 months, Tether’s market cap rose to $ 15.7 billion, while its top four competitors hit $ 4.1 billion. Despite all of the controversy surrounding USD support, USDT has held a market share of nearly 80% of all fiat-backed stablecoins.
A nearly identical story can be seen in trading volume, with Tether dominating by a 75% lead.
Consolidated crypto volume by base pair. Source: CryptoCompare
Data from CryptoCompare shows that USDT had a market share of nearly 73% over the past three months. Before doing any further research, it should be noted that the numbers vary depending on the data provider, as some exchanges are often excluded due to a lack of transparency.
Despite these inconsistencies, CryptoCompare’s research director Constantine Tsavliris stated the following:
“In terms of Bitcoin trading in USDT or other equivalent stablecoins such as USDC or PAX, we did not notice any significant volume shift.”
A stable bitcoin ramp is irrelevant to the bitcoin price
Most merchants have gotten used to using Bitcoin (BTC) as the primary gateway to cryptocurrencies. This solution was possibly the only, or at least the most liquid, for most traders in 2017 or 2018, but as the stable coin market grew, the volume of altcoin paired with USDT soared.
A wider range of altcoin pairs followed the higher stablecoin volumes, and when Coinbase, Huobi, and Binance launched their own stablecoins, that trend accelerated.
It would be wrong to conclude that the decreasing use of Bitcoin as the main ramp for cryptocurrency is detrimental to price. Those who purchase BTC as a pass-through may have increased the volume but used the same amount to later sell it in exchange for altcoins.
Even using stablecoins as the premier on-ramp solution, some of that flow will ultimately be carried over to Bitcoin. In addition, most crypto assets are not direct competitors to BTC’s added value and scarcity offerings.
Chain links in and out after 24 hours. Source: Coinlib.io
For example, the graph above shows the outflow from Chainlink (LINK) to BTC of $ 26.6 million over the past 24 hours. A similar trend occurred with the remaining altcoins, confirming that Bitcoin is not losing volume as stablecoins establish themselves as the dominant base pairs.
By analyzing the combined market volume for cryptocurrencies, it can be determined whether stable coins have increased total market share or are simply taking the markets away from Bitcoin.
Total Crypto Market 7-Day Average Volume, USD billion. Source: TradingView
The graph above is probably amazing even for traders who experienced the bubble in late 2017. The daily high of $ 36.6 billion in January 2018 may have been too high at the time, but is rather shy compared to the current $ 100 billion.
Regardless of whether fake volumes affect this view, we can see that there is a significant increase in proportion. That volume growth coincides with the issuance of stable coins from $ 3.6 billion in June 2019 to $ 18.9 billion today.
Volume dominance is a key factor
Michael Saylor, co-founder and CEO of MicroStrategy, believes that BTC primarily uses the reserve currency. Hence, it doesn’t compete with tokens like Ethereum (ETH) and stablecoins.
Unlike traditional bitcoin dominance data based on market capitalization, Saylor’s analysis only includes coins based on proof-of-work mechanisms.
Even if you compare the volume of Bitcoin to a broader asset base, when you analyze the transparent volume, it equals the sum of the top 20 altcoins.
30 days of cumulative transparent volume, USD. Source: Nomics
With the above data in mind, it’s safe to say that stablecoins don’t compete with Bitcoin in terms of market capitalization or volume.
Tsavliris stated that he believes this is the case because:
“For the top altcoins of the past few months, the volumes are not necessarily moving away from the BTC markets. Rather, they are offered and used together with the USDT markets. USDT markets are attractive because they are attractive compared to BTC markets Generally, most exchanges offer superior liquidity. “
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