Tether Mints New Coins to Capitalize on Bitcoin’s Recovery

Key Takeaways

• Tether (USDT) is poised to become the first stablecoin to reach a market capitalization of $100 billion.
• Unlike other cryptocurrencies, USDT’s market capitalization is tied to its circulating supply.
• USDT’s prominence is evident in its extensive pairing across the crypto space and its daily trading volume.

Tether is on the brink of joining the elite group of cryptocurrency projects valued at tens of billions of dollars, a distinction currently held by only four cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and CoinAid (BNB).

With a market capitalization  of $96 billion, USDT is poised to become the inaugural stablecoin to achieve this significant market capitalization milestone.

Bitcoin and Ether Stand Firm in Elite Crypto Club as Others Fluctuate

Bitcoin first surpassed the noteworthy threshold in October 2017, journeying toward its initial peak of $20,000. Ethereum (ETH) and Ripple (XRP) were not far behind, though XRP briefly dipped below this benchmark shortly after reaching it.

BNB marked its entry during the subsequent cycle, nearly touching $110 billion in market capitalization in November 2021, coinciding with Bitcoin’s all-time high. However, its tenure in this exclusive club was short-lived, leaving only Bitcoin and Ethereum as the steadfast members.

Several other cryptocurrencies have closely approached this mark. Cardano (ADA) achieved a market cap of $95 billion during the last bull market, while Dogecoin (DOGE) was on the cusp of $89 billion a few months prior. Solana (SOL) also made a notable impression, reaching around $77 billion during Bitcoin’s peak at $69,000 over two years ago. Despite a commendable recovery in the past eight months, Solana’s value is currently estimated to be roughly half of its peak.

The chart below represents market capitalizations of various projects as though they were all initiated on the same date, notwithstanding some data gaps from the initial phases of certain projects:

Stablecoin Dynamics

Unlike typical cryptocurrencies such as Bitcoin and Ethereum, whose market caps are derived by multiplying token prices with circulating supplies, stablecoins like Tether (USDT) operate distinctively. The value of cryptocurrencies like Bitcoin and Ether is determined through trading on crypto exchanges. In contrast, USDT’s value is anchored to $1, and each token is intended to be supported by assets equivalent to one dollar, primarily  in U.S. Treasuries, in Tether’s reserves.

Market confidence generally holds that each USDT token is worth $1, contingent on Tether’s ability to redeem tokens for actual U.S. dollars. While USDT’s peg may occasionally fluctuate on certain exchanges, drawing scrutiny, these instances are more reflective of individual platform liquidity than of Tether’s inherent value.

The perception of USDT being fully backed hinges on the value of Tether’s holdings surpassing the total token supply, underpinning its recent strategic emphasis on highly liquid, short-dated U.S. Treasurys.

USDT Market Cap Mirrors Circulating Supply

The market capitalization of USDT is intrinsically tied to its circulating supply, dynamically responding to the demand from key ecosystem players like major traders, market makers, and liquidity providers. Tether directly manages the issuance and lending of USDT, historically reducing the supply (burning) during periods of low demand and increasing it (minting) when demand rises.

USDT’s prominence is evident in its extensive pairing across the crypto space, making it the most traded cryptocurrency with a current daily volume of around $45 billion, according to CoinMarketCap . The company has been notably active in minting new supply, especially as markets anticipated the approval of spot bitcoin ETFs in the US.

The circulating supply of USDT surged to $85 billion last October, indicating that Tether has introduced  over $10 billion in new tokens within three months, a period during which Bitcoin’s value soared by 60%. If USDT’s market cap reaches $100 billion, it would mark a significant milestone, positioning it as the slowest crypto project to achieve this feat to date.