Stablecoin issuer Tether’s USDT has regained its previous all-time high market capitalization despite a shrinking stablecoin market.
USDT reached an $83.2 billion market capitalization on Thursday, the company reported, equaling its previous peak little more than a year ago. It has recovered all of the $18 billion it lost since the dramatic implosion of blockchain project Terra in May 2022 and following market rout.
Tether’s milestone is significant as it runs counter to a 14-month stablecoin market decline. Stablecoins are a $129 billion subset of cryptocurrencies and key plumbing in blockchain-based finance, bridging government-issued fiat currencies with digital assets and facilitating trading.
USDT has greatly benefitted from the recent woes of its closest rivals. The second largest stablecoin USDC, which is issued by Circle, was hit by the implosion of banking partner Silicon Valley Bank in March, and subsequent wobbles in its price stability are still weighing on the token. The one-time $20 billion Binance USD (BUSD) was essentially given an expiry date when New York state regulators forced issuer Paxos to stop minting new tokens in February.
Tether has been criticized for years for lack of transparency about its reserve assets, including potentially risky loans to undisclosed debtors. Last year, a U.S. judge ordered the firm to produce documents about USDT’s backing as part of a lawsuit that alleged Tether conspired to manipulate the bitcoin (BTC) price with freshly minted tokens. A Wall Street Journal article reported that in the past, the company used falsified documents to get bank accounts.
Stablecoin holders, however, have flocked to USDT during this turbulent period due to its perceived safety from U.S. regulators and banks, propelling its market share to its highest level in at least 22 months.
“Tether’s rise suggests peg stability is far more important for most stablecoin holders than issuer transparency,” Conor Ryder, an analyst at digital asset research firm Kaiko, noted in a report.
A Kaiko report last month raised suspicion about what it termed USDT’s “inordinate” market cap surge because the increase was inconsistent with a plunge in trading volumes to multi-year lows. Other stablecoins’ market cap has generally correlated with trading volumes.
Paolo Ardoino, Tether’s chief technology officer, said in an interview with The Block that the difference comes from USDT’s growing use for payments predominantly in the developing world, which now accounts for about 40% of all token activity.