Tether’s market capitalization (USDT) exceeded $12 billion as of Aug. 14, according to cryptomoney market analyst firm Coinmetrics. Meanwhile, some believe that the rapidly rising valuation of the dominant stable currency benefits Bitcoin (BTC) in the long term. But some investors also fear that it will make the crypt-currency market vulnerable.
Tether has been the most widely used stable Bitcoin Revolution currency for several years and has experienced exponential growth. In January 2017, the total supply of Tether was around USD 10 million. In four years, that number has multiplied by 1,200.
Tether exceeds USD 10 billion, passing to other competing stablecoins
Advantage for Bitcoin or vulnerability?
Tether is used as a substitute for fiduciary currencies in major exchanges, including Binance and Bitfinex. As such, investors in crypto currencies often rely on Tether to store capital on the margin.
Coinmetrics researchers explain:
„Switching to stable currencies allows investors to effectively keep money on the sidelines without having to withdraw it entirely in fiat currency and incurring fees. This race to safety probably accounted for a significant portion of the increased demand for stable currencies after March 12.
Peter Brandt’s warning about Tether is dire, but not very clear
Since Tether is often used to protect against major cryptosystems, one could argue that its supply represents capital waiting on the sidelines. When Tether’s supply expands, it could indicate that investors are actively protecting, leaving an abundant supply of capital ready to enter the crypt-currency market.
Charles Edwards, a digital asset manager, pointed to Tether’s growing offering as a catalyst for Bitcoin. He said the 26% increase in Tether is one of eight key factors that are driving BTC upwards. He said:
„How can you be Bitcoin bearish here, Portnoy at Bitcoin, Fed investigates crypto dollar with MIT, shift from support to gold resistance, +26% Tether, 45% supply hasn’t moved in 2 years more, rising energy value > price, profitable mining and price close to production cost, accumulation price structure“.
While some analysts consider Tether’s expanding supply to be an optimistic trend, others have expressed concern about the stable currency. Coinmetrics addressed several issues that Tether has faced in recent years, including a demand from the New York Attorney General’s office.
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The well-known trader Peter Brandt previously criticized Tether, calling it „just another fiat currency“. He said:
„The problem is that tether is funny money, a derivative fantasy sold by cryptomoney exchanges. As the graph in @Silver_Watchdog shows, the total market capitalization of tether exceeds the total capitalization of cryptomonies. This is imaginary money backed by air“
Still, the researchers emphasize that Tether remains dominant and continues to expand to other blockchains. The researchers noted:
„But despite Tether’s problems and the introduction of new stable currencies, USDT remained dominant and continued to grow. Originally launched using the Omni protocol in the Bitcoin block chain in early 2018, Tether began to expand to other networks.
The confluence of several positive macro factors, including institutional adoption, the weakening of the USD through the increasing expansion of the money supply, and the increase in the supply of Tether, has led to improved sentiment around Bitcoin, with some analysts predicting further spikes for BTC before 2021.