The parabolic growth in the stablecoin giant Tether (USDT) market cap came to a sudden halt at the end of May as the Bitcoin price broke out of all-time highs. With Bitcoin, which has since been trading between $30,000 and $40,000, the relationship between the two cryptocurrencies gives rise to different rumors. Has Tether stopped increasing the price of Bitcoin? We’re reviewing comments.
Tether (USDT) pressure rises
Tether’s sudden pause, according to analysts and observers, revealed that the world’s most underrated cryptocurrency is seeing its dominance threaten by three unprecedented challenges combined in a complete storm to shake up Stablecoin. One of them was that it made it difficult for investors to buy USDT with fiat, while at the same time, USDT’s competitors became stronger. Finally, the pressure on Tether is increasing.
On the other hand, an executive at Tether acknowledged that demand for USDT has fallen, arguing that the trend is not exclusive to the token. Paolo Ardoino, Tether’s chief technology officer, used the following terms in a written response through a spokesperson:
Tether demand has been hit by ups and downs and low demand in recent weeks, and USDT isn’t the only stablecoin to fall.
Chinese crackdown on crypto deeply affects markets
Crypto pressure on both Bitcoin mining and trading in China has pushed BTC back 32% since its April peak. However, another victim of the impact has been USDT, which can be attributed to its dominance among traders and investors. Investors and traders in China favored the dollar-pegged stablecoin, as fiat-to-crypto trading or buying cryptocurrencies with government-issued cash remains illegal in the country.
Additionally, last month, Chinese police arrested more than 1,000 people on money laundering charges, alleging that they are using crypto to help them escape substance. Such action against OTC traders could help explain why USDT growth has slowed significantly in China. At the same time, Bitcoin is now 30,000-35. There is also no incentive for new cash to enter the crypto market in China as it tries to break above the $1,000 range. Rachel Lin, former vice president and co-founder of Singapore-based crypto investment firm Matrixport, explains:
Tether’s market in Asia is mostly through OTC traders, and there is less demand for Tether as less cash enters the market.
While demand for USDT is dwindling, the rising star of the stablecoin market is USDC, another dollar-pegged stablecoin backed by crypto financial services firm Circle. At the same time, Boston-based Circle announced its plan to go public using a privately-owned acquisition company (SPAC), shortly after announcing its intention to expand USDC to up to 10 blockchains outside of Ethereum. Justin Sun is in the middle of their blockchain with Tron, which has recently started supporting USDC. Sun’s statements are as follows:
I think USDC has good fortune to compete with Tether in the Asian stablecoin market. I feel that the stablecoin market in Asia right now needs a diversified infrastructure and customers in Asia are looking for more stablecoin options.
Additionally, according to information from Glassnode, around 50% of the USDC supply is currently locked in smart contracts. “USDC is increasingly used for On-chain and payment use cases that continue to grow,” Messari research analyst Ryan Watkins said in a statement, “while USDT is mainly used for mid-exchange settlement and margin for derivatives, use cases that retract as the market calms down.” found.
Bears against Tether (USDT) vulnerability
One of the ongoing issues for USDT is the third challenge facing the world’s largest stablecoin by size. Noelle Acheson, the market leader of Genesis Global Trading, also explains:
The market is full of bearish sentiment and traders are looking for a reason. FUD season and rope vulnerabilities are almost always a part of that conversation.
At the same time, according to Acheson, the market is “hungry” for explanations as to why the price is so “lazy” and USDT is a complete goal as long as it remains unclear about the corporate reserves behind the dollar-pegged stablecoin.
More questions about USDT and other stablecoins have been raised recently by regulators and governments around the world. Speaking before the US House of Representatives Financial Services Committee on Wednesday, Federal Reserve Leader Jerome Powell asked Representative Anthony Gonzalez (R-OH) about Tether’s nearly half-full holdings, according to a May statement. Powell’s response took the form:
Commercial papers are short-term overnight liabilities of companies and they are investable many times, more than one time they are very liquid, all are sufficient. However, in the face of crises, “the market is disappearing. That’s when people will want their money.
In exchanges, some of this bearish trend infused with regulatory woes is reflected in the growth of the USDC/USDT trading pair on Binance. The trading pair is currently the most active on the spot market, featuring the USDC stablecoin. In other words, Binance’s traders are swapping in the middle of USDC and USDT as they potentially find the price of USDT going down, or at least find more benefits in USDC.
In conclusion, the above three reasons are the reasons why Tether is afraid of printing new USDT, according to crypto and finance experts. Hassan Bassiri, vice president of Los Angeles-based asset management firm Arca, explains that some traders may be “borrowing USDT and exchanging it for USDC”:
You know that USDC costs $1, so you borrow USDT by exchanging it with USDC. If USDT is not fully supported, you can use USDC to buy back USDT for less than $1.