The market capitalization of Tether (USDT) on August 12 was more than $ 12 billion, according to cryptocurrency market analysis firm Coinmetrics. Meanwhile, some believe that the rapidly growing appreciation of the dominant stablecoin in the long run positively benefits Bitcoin (BTC). But some investors are also worried that it will make the cryptocurrency market vulnerable.
Tether has been the most widely used stable coin for several years, and it has seen exponential growth. In January 2017, Tether’s total offering was hardened to about $ 10 million. Within four years, that number has increased by 1,200 times.
The increase in Tether’s offering since 2017. Source: CoinMetrics
Fireworks for Bitcoin as Vulnerability?
Tether is used as a replacement for fiat currencies across major exchanges, including Binance and Bitfinex. As such, cryptocurrency investors often rely on Tether to put capital on the sidelines.
Coinmetrics researchers explain:
“Continuing in stablecoins, investors can effectively keep money on the sidelines without going too high in fiat currency and making fees. This rush to security probably accounted for a significant portion of the increased demand for stablecoin after March 12th. “
Since Tether is often used to hedge against large cryptocurrencies, an argument could be made that their supply capital represents on the sidelines. As Tether’s offering expands, it may indicate that investors are actively hedging, leaving a whole range of capital ready to enter the crypto market.
BTC / USD price vs. Tether market capitalization. Source: Skew
Charles Edwards, a digital asset manager, outlined Tether’s growing supply as a catalyst for Bitcoin. He said the 26% increase in Tether is one of the eight fundamental factors driving BTC upwards. Hy sei:
“How can you be bearish Bitcoin here? – Portnoy in Bitcoin – Fed research crypto-dollar w MIT – Gold S / R flip – + 26% Tether – 45% supply has not moved in> 2 years – Energy value increased> price – Mining profitable and price near production costs – Accumulation price structure. “
While some analysts view Tether’s expanded offering as an optimistic trend, others have expressed concern about the stablecoin. Coinmetrics has addressed several issues facing Tether in recent years, including a lawsuit filed by the New York Attorney General’s Office.
Well-known trader Peter Brandt has previously criticized Tether, calling it “just another fiat currency.” Hy sei:
“The problem is that tether is funny money – a derivative make-believe peddled by the crypto exchanges. As the @Silver_Watchdog chart shows, the total market cap of tether is the total cap of cryptocurrencies greater. This is imaginary money supported by air “
However, the researchers claim that Tether remains dominant and extends to other blockchains. The researchers noted:
“But despite Tether’s problems and the introduction of new stable coins, USDT remained dominant and continued to grow. Originally launched with the Omni Protocol on the Bitcoin blockchain, at the beginning of 2018, Tether began to expand to other networks. “
The combination of several positive macro factors, including institutional acceptance, the weakening of the US dollar through the increasing expansion of the money supply, and the increasing supply of Tether, has boosted the sentiment around Bitcoin to improve with some analysts calling for 2021 predicts new highs for BTC.
