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. 

Binance ‘Unknowingly’ Earns $775K via Staking, Set to Launch Huge XLM Giveaway

On Thursday (July 18), Binance, the world's largest cryptoasset exchange (by adjusted trading volume), made a rather interesting announcement: it had "unknowingly" earned 9.5 million Stellar Lumen (XLM) tokens through staking rewards, and it is going to give all of it away to all Binance users who maintain XLM balances between July 20 and September 1.

Binance explained via a blog post that in August 2018 the Binance team followed the advice of the Stellar Development Foundation "to change some parameters on both cold and hot wallets," which resulted in the exchange "unknowingly" earning staking rewards for its XLM holdings since 31 August 2018.

Then, this week, while the Binance team was considering the idea of adding support for XLM staking, it found out that Binance had earned around 9.5 million XLM tokens (each of which was worth approximately $0.08157 at the time). Binance notes that all "weekly staking rewards between then and now are documented on the blockchain." 

So, the team made two decisions:

  • add support for XLM staking to Binance.com; and
  • give away the aforementioned staking rewards to the Binance community (i.e. Binance users).

This is not the first time that Binance has added staking support to Binance.com. The exchange already "distributes NeoGas for NEO holders, Ontology Gas for Ontology holders, VTHO for VeChain holders, and BitTorrent tokens for TRON tokens."

Here is how this 9.5 million XLM giveaway is going to happen.

From July 20, Binance will support XLM staking. Between this date and September 1, Binance will take "daily snapshots" of XLM balances in Binance user accounts.

Then, on September 1, Binance will "tally average user XLM balances based on these snapshots," and process the distribution of staking rewards to these user accounts (that maintained XLM balances during the staking period). Furthermore, the roughly 9.5 million XLM tokens that Binance has unknowingly earned to date will be distributed as a bonus payment to all Binance users who jave maintained non-zero XLM balances since July 20. 

Binance says in its blog post that it estimates this "one-time distribution of 9,500,000 XLM shared proportionately among Binance users" to be worth "10 to 12 months of typical monthly rewards."

According to a support article published on July 18, here are the details of Binance's "Monthly XLM Staking Airdrop Program":

  • Binance will start these daily XLM balance snapshots at 00:00 (UTC) on 20 July 2019.
  • This is how Binance will calculate the XLM staking distribution:

XLM generated by each user = Total XLM staking rewards received by Binance * User XLM holdings ratio. User XLM holdings ratio = User XLM holdings / Total XLM staked by Binance.

  •  In order to qualify for XLM staking rewards, Binance users must have a balance of at least 10 XLM.
  • This initial distribution of XLM staking rewards will be calculated until 1 September 2019, "with the total amount distributed equal to the staking rewards accrued on holdings during the 43 day period."
  • These XLM staking rewards are calculated on a daily basis and are distributed monthly. 
  • XLM distrubutions will be "completed before the 5th of each month."

In other Binance news, another support article explained that Binance's Margin Trading platform has added support for two margin assets (EOS and LINK), three borrowable assets (BNB, EOS, and LINK), and three margin pairs (EOS/USDT, EOS/BTC, LINK/USDT, LINKBTC).

Binance's announcement about its 9.5 million XLM giveaway may have helped the XLM price. According to CryptoCompare, XLM is currently trading at $0.08914, up 7.96% in the past 24-hour period:

XLM-USD 24-Hour Chart on 18 July 2019.png

Featured Image Courtesy of Binance