The stablecoin Tether (USDT) has reached a new all-time high (ATH) of market capitalization of over $83 billion in light of its continued market dominance.
The new market capitalization high for USDT comes in a year where other stablecoin issuers are struggling to stay afloat due to regulatory issues. The same was noted by the CEO of the Binance cryptocurrency exchange, Changpeng Zhao.
In a tweet, Zhao drew attention to Binance USD (BUSD), the Binance-branded stablecoin issued by Paxos. The Binance CEO said that BUSD, a fully regulated stablecoin, was “capped” by the New York Department of Financial Services (NYDFS) to $23 billion and currently has a market capitalization of $5 billion, and since then, USDT has experienced tremendous growth.
BUSD, a fully regulated stablecoin, was “capped” (no new minting) by NYDFS at $23b. Now at $5b market cap.
Since then, USDT has seen tremendous growth. https://t.co/KqBkDK71WS
— CZ Binance (@cz_binance) June 1, 2023
In February, the NYDFS ordered Paxos to halt any new issuance of BUSD, citing violations of securities laws.
At a time when USDT has reached a new all-time high in terms of market capitalization, its competitors such as USD Coin (USDC), issued by Circle, and BUSD, are struggling to maintain their market share. The second largest stablecoin, USDC, has a market capitalization of $28.8 billion, a difference of more than $50 billion from USDT. For context, at one point, USDC’s market dominance was approaching that of USDT’s, with its market capitalization reaching an ATH of $55.8 billion in June 2022.
The prolonged bear market of 2022 took its toll on both stablecoins, with their market capitalizations declining after the June 2022 highs. However, USDT has managed to bounce back with increased market dominance, while USDC’s market capitalization has nearly halved.
The main reason for the decline in market share of other stablecoins can be attributed to regulatory oversight by US regulators and the ongoing banking crisis. Following the ban on new minting of BUSD for violating securities laws, its market capitalization fell rapidly as users began converting their BUSD to other stablecoins.
Similarly, for USDC, the biggest crisis came from the collapse of Silicon Valley Bank, where the stablecoin issuer had about $3.3 billion in reserves. This caused the market to panic and eventually lose its peg to the US dollar. Although USDC regained its peg the next day, this significantly affected its market capitalization, with many users converting their USDC to other stablecoins for fear of a complete crash.
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