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Tether’s grip on crypto market eroded by harsh competition

Tether Responds to Reports on Chinese Securities Backing USDT ReservesTether Responds to Reports on Chinese Securities Backing USDT Reserves

In this post:

  • Tether’s dominance in the cryptocurrency market is waning.
  • Tether’s market cap dropped by 1.2% in August but still remains three times larger than its nearest competitor.
  • The overall stablecoin market has been contracting for 17 consecutive months.
  • Regulatory challenges and reduced DeFi activity contribute to the decline.

Tether’s once undisputed dominance in the cryptocurrency landscape is being tested. The stablecoin giant, which has long been the cornerstone of the digital-asset market, is seeing its influence wane as challengers step up their game and the industry grapples with regulatory scrutiny and waning investor interest.

Tether’s Luster Dims in Stablecoin Wars

In the rapidly-evolving world of cryptocurrencies, a decrease in Tether’s market capitalization is a glaring indicator of its diminishing power. In August, the market cap of Tether’s USDT token slipped by 1.2%, settling at $82.9 billion, as per data from CCData.

It’s crucial to note that this figure still towers over its nearest competitor by a factor of three. For context, stablecoins, including Tether, are digital tokens often tethered on a one-to-one basis to assets like the dollar, and are primarily utilized to facilitate trading and digital asset transfers across exchanges.

This decline isn’t an isolated incident restricted to Tether. The broader stablecoin cosmos has been on a downslope for the 17th month straight, slumping by 0.4% to approximate $125 billion.

Reasons abound: increasing interest rates, the tightening noose of regulation, and a palpable drop in investor zeal. Yet, amid this tempest, Tether remains the undisputed king when it comes to trading volume.

CCData’s Jacob Joseph attributes this decline to more than just slumping trading volumes. He points to diminished activity in the decentralized finance (DeFi) arena as a significant factor. Not surprisingly, Tether’s team chose silence over commentary regarding these revelations.

A Shifting Stablecoin Landscape: New Players, New Rules

Rapid transformations are sweeping the stablecoin sector. Binance’s branded stablecoin, BUSD, is experiencing a gradual phase-out, in no small part due to US regulators flexing their muscles.

Circle’s USDC token, a strong contender against Tether, has seen its market share dwindle by half over the last year, thanks to upheavals at Silicon Valley Bank, the custodian of the firm’s reserves. At the end of August, USDC’s standing was virtually unchanged, hovering around $26 billion.

There’s more. First Digital Group’s newbie, the FDUSD stablecoin, is making waves. Largely propelled by incentives to users on the Binance platform, it’s making a hard push to replace BUSD, especially as Binance finds itself in the crosshairs of US regulators.

However, it’s not all doom and gloom. There are glimmers of optimism for the stablecoin market. An uptick at the close of August suggests brighter horizons, underlined by some landmark moments for the sector.

To name a couple: PayPal Holdings Inc. dropped the bombshell about its entry with a new stablecoin, and Grayscale received the legal green light to metamorphose its Bitcoin Trust into a physically-backed Bitcoin exchange-traded fund.

These events, coupled with sustained stablecoin activity across different blockchains, might hint at an impending resurgence. James Seyffart of Bloomberg Intelligence maintains that the stablecoin use across various blockchains has largely held its ground.

Bottomline Tether’s once-unassailable position is being rigorously challenged. As the crypto world continually reshapes, even the titans aren’t immune to the tremors.

The coming months will be pivotal in determining if Tether can hold onto its crown or if the relentless march of competition will finally erode its long-standing dominance.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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