Tether Still Dominates Stablecoin Sector, Despite Doubts

  • Tether (USDT) holds on to a massively dominant market share as new competitors struggle for traction
  • Exchange-driven efforts to increase choice may be beginning to influence traders
  • USDT has a market capitalisation almost 10x that of its nearest competitor

Despite a six month period punctuated by bad publicity, worries regarding its stability, and increasing competition, new research by CryptoCompare has revealed that Tether (USDT) has maintained an almost complete grip on the Bitcoin-to-Stablecoin markets. 

According to figures published as part of CryptoCompare’s monthly Exchange Review for December, Tether (USDT) has continued to take the lion’s share of overall BTC trading volumes. According to the report, published today, its pairs accounted for around 65% of all bitcoin-related volume during the last month of 2018. In that same period, its new competitors - Gemini’s GUSD, Circle’s USD Coin (USDC) and Paxos Standard PAX - only managed to take a chip of around 2% away from Tether's stablecoin dominance.

Tether's stablecoin dominance in Bitcoin pairings never fell below 97%

At the start of October 2018, BTC-Stablecoin pairs were dominated at almost 100% by Tether. Since mid-November, however, Circle’s new stable coin offering, USDC, has managed to carve out a 1%-ish niche for itself. New York-regulated dollar-linked coin, Paxos Standard (PAX), then moved into market during December to take around 2% of the pie. At no point, however, has USDT’s dominance of the stablecoin scene amounted to less than 97% across the wide range of exchanges covered by the cryptocurrency data site’s aggregation.  

That’s despite the world's biggest exchange Binance - and USDT’s spiritual home, Bitfinex, a service with which it shares senior management - both making concerted efforts to loosen their ties to Tether during that time. Binance moved to widen its range of Stablecoins in the run up to the end of 2018, by bringing in its combined USDS market tab, allowing users to see how crypto-assets are priced against a tranche of four different stablecoins. In early December, to the surprise of many observers, Bitfinex opened up new pairs with five new options - all those previously mentioned plus the Ethereum-backed Dai (DAI) and longer-standing Tether alternative, True USD (TUSD) - having previously been synonymous with USDT. 

Even more eye-catchingly,  Bitfinex has since activated margin trading on the USDT/USD pair. That move, which has been interpreted as a slight against Tether’s stability, essentially allowed traders to hedge against the effects of the so-called ‘Tether Premium’. That’s the name given to the de facto surcharge the market places on buying Bitcoin and other cryptocurrencies using USDT as opposed to ‘real’ dollars. Currently, the premium, is running at around 1.47%, meaning USDT pairs are pricing bitcoin approximately $52 dollars higher than USD markets. 

At the height of doubts about Tether’s future earlier in the year, fuelled by long-term banking issues and doubts about its reserves, that Premium was in excess of $1,000 at points of high-volatility

Much of the increase in interest in PAX appears to have come since Binance opened up its pairings, allowing PAX to be traded against USDT and other crypto-assets since early October. That was a move that was applauded by its CEO Changpeng Zhao in a tweet that simultaneously side-eyed Tether. The PAX USDT pairing saw a 70% rise in volume through December, according to CryptoCompare’s figures, with the biggest day of trading falling on December 20th. 

While PAX appears to be the most likely of the new batch to gain ground on USDT, it still has a long way to go. At the time of writing, it hold about 1.54% of the BTC trading volume - compared to the 64.39% USDT takes. While that hints that interest in it has grown further since the time frame of the CryptoCompare research, according to its last audited attestation, Paxos Standard had a circulation of $142.3 million as of December 31st.

By contrast, on the same date stablecoinindex.com shows Tether’s market cap to be nigh-on $1.92 billion. That gives just some idea of how big the gap is in terms of adoption and demand. The only other stablecoin currently residing in that cavernous gap between Paxos and Tether, is True USD; on that same day it’s market cap was 'just' $207 million, leaving it not much nearer. 

It would seem then, for now, that the brand recognition and established nature of Tether is enough to simultaneously drown out the voices of even the most vociferous of doubters, and hinder any wannabe looking to step into that market cap chasm. It would also seem that users of Bitfinex et al will continue to happily trade with it on exchanges where US dollar pairs are not an option while it's still a useful option. 

A sign of whether that is likely to change any time soon, will only come as we see whether the increased cross-stablecoin arbitrage options can bring a rise of interest in those competitors. Also, whether moves - like that of Binance - to unify stablecoin options brings the kind of liquidity to alternative pairings that traders obviously value with Tether.