USDT Usage Plummets to 4-Year Low Despite Record Market Cap

USDT’s dwindling trading and surging market cap raise questions about its actual usage and crypto market impact.

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  • Trading activity involving Tether’s USDT stablecoin has hit multi-year lows.
  • USDT has remained the most widely used stablecoin regarding market cap and trading volume.
  • USDT’s trading volume has plummeted due to lackluster crypto trading and the reintroduction of trading fees.

In a striking turn of events, trading activity involving Tether’s USDT stablecoin has reached its lowest point in the past four years, even as its market capitalization approaches an impressive all-time high of $83 billion.

Increase in USDT Supply Outpaces Trading Volume

According to a recent report from cryptocurrency market research firm Kaiko, the decline in trading volume for USDT, which serves as a vital tool for trading among stablecoins, raises doubts about the token’s remarkable surge in market capitalization. 

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Kaiko suggests that the situation seems rather peculiar, given the substantial increase in USDT supply while its actual utilization diminishes.

Stablecoins have emerged as a crucial component within the digital asset ecosystem, bridging traditional currencies and cryptocurrencies. With a combined market capitalization of $129 billion, these dollar-pegged stablecoins are pivotal in facilitating cryptocurrency trading.

USDT Trading Fee Reintroduction

Tether’s USDT, recognized as the most widely adopted stablecoin in market capitalization and trading volume, has experienced significant growth this year, nearing its previous record market cap of $83.4 billion, established in May 2022. 

This surge can largely be attributed to the collapse of various banks and a regulatory crackdown on competing stablecoins, notably Circle’s USDC and Paxos’ BUSD.

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Nevertheless, the trading volume of USDT has recently experienced a substantial decline. This decline stems from lackluster crypto trading amidst a bear market and the reintroduction of trading fees for USDT asset pairs by Binance, the world’s largest cryptocurrency exchange. 

Trading Volume Lowest Seen Since March 2019

CoinGecko’s data reveals that USDT’s daily trading volume has plummeted below $10 billion over the weekend for the first time since March 2019.

“When examining the actual usage of the stablecoin on both centralized and decentralized exchanges, the observed increase appears rather abnormal,” expressed Kaiko, shedding light on the disparity between USDT’s soaring market cap and its diminishing trading activity.

On the Flipside

  • While trading with Tether’s USDT stablecoin has fallen to multi-year lows, it’s worth noting that stablecoins serve various purposes beyond trading, such as providing stability and liquidity to the crypto market.
  • Despite the recent decline in trading volume, USDT remains the most widely used stablecoin, indicating its continued importance and influence in the crypto ecosystem.
  • The decrease in USDT’s trading volume could reflect the overall market conditions, including a bear market and the impact of regulatory measures, rather than solely indicating a lack of confidence in the stablecoin itself.

Why This Matters

The decline in trading activity surrounding Tether’s USDT stablecoin, despite its soaring market capitalization, raises significant concerns about the token’s actual usage and its impact on the broader crypto market. 

This discrepancy sheds light on the evolving dynamics within the cryptocurrency ecosystem, emphasizing the need for a closer examination of stablecoin functionality and its role in facilitating crypto trading.

To learn more about Tether’s efforts to strengthen stablecoin reserves and their BTC investment, read here:

Tether Strengthens Stablecoin Reserves with BTC Investment

To stay updated on Tether’s fortification of reserves and the surge in USDT profits during Q1, read here:

Tether Fortifies Reserves & USDT Profits Surge in Q1 Triumphs

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a cryptocurrency news reporter for DailyCoin, specializing in Ripple, stablecoins, as well as price and market analysis news. Before his current role, Kyle worked as a student researcher in the cryptocurrency industry, gaining an understanding of how digital currencies work, their potential uses, and their impact on the economy and society. He completed his Masters and Honors degrees in Blockchain Technology within Esports and Business and Event management within Esports at Staffordshire University.