While the daily volume of Tether’s USDT fell to multi-year lows over the weekend, the market valuation of the stablecoin is currently at an all-time high of $82.9 billion.
According to crypto market research firm Kaiko, since stablecoins’ primary use is for trading, the unprecedented surge in USDT’s market cap is “questionable” given that the token’s use plummeted.
“Typically, changes in trade volume have been loosely correlated with changes in Tether’s market cap, with occasional surges during periods of notable market activity. Today, the correlation is at zero,” Kaiko noted.
Stablecoins whose value is tied to the fiat currencies like the dollar are primarily used as a somewhat secure “parking space” for crypto volatility and as a bridge to trade cryptocurrencies.
USDT, issued by Tether, and USDC managed by the Centre consortium are the two most widely used stablecoins measured by market cap and trading volume.
At present, Tether accounts for over 50% of all trades on centralized exchanges. On DEXs, USDC remains the dominant stablecoin.
Just 20% of non-stablecoin swap volume on DEXs is represented by USDT; while this is an increase from the beginning of the year, it is not necessarily sufficient to account for the more than $15 billion gain in market size during the same period.
One possible explanation behind Tether’s rise in market cap could be the impending demise of BUSD together with USDC’s March de-pegging event.
Based on a previous coverage by TronWeekly, the market value of Circle’s USDC depreciated in late March when the company disclosed that beleaguered Silicon Valley Bank [SVB] owned $3.3 billion of the reserves that were utilized to support it.
Even though investors flocked toward its rival, Kaiko pointed out that the “increase seems inordinate” particularly when compared to other stablecoins over the previous few months. This is mostly because Binance promoted TUSD as a substitute for BUSD.
Tether’s USDT Issued Mostly On TRON Network
Next, the research platform took note of how the majority of USDT tokens are issued on the TRON blockchain, especially on offshore exchanges like Binance and OKX.
Although TRON’s DeFi activity is negligible compared to Ethereum’s, it may indicate that market makers and whales favor this network due to its low transaction fees.
With USDC, the relationship between transaction volume and market cap was found to have a “clean correlation.”
“Overall, USDT’s market cap has little correlation with trade volume, which is questionable considering the primary use case for this stablecoin is trading,” Kaiko added.