Tether Holdings Ltd, the issuer of the largest stablecoin, Tether (USDT), announced that its total market capitalization exceeded $ 64 billion for the first time in history.

The company called the event a “milestone,” adding that it is yet another indication of the cryptocurrency market’s “continued confidence” in its stablecoin.

Tether’s USDt Market Cap Hits $ 64 Billion!

A new milestone reached and another sign of the continued trust of the market in #Tether! pic.twitter.com/t85i6e6UQt

– Tether (@Tether_to) August 16, 2021

In detail, Tether’s business model revolves around making digitized dollars available to cryptocurrency traders and investors. In this way, the company offers them a way to park their volatile digital assets in USDT, a digital asset that maintains a one-to-one peg to the US dollar.

As a result, Tether is helping crypto traders and investors avoid the hassle of transferring their digital asset sales proceeds to a bank account.

The company’s business model has secured itself in the crypto industry in that trading between Bitcoin (BTC) and USDT typically takes place twice as often as between Bitcoin and the US dollar.

Signal crypto demand

Tether officials previously made it clear that the new USDT spending is being made to meet customer orders.

Hence, rising USDT market capitalization suggests that traders and investors are looking to buy the stablecoin and use it to buy digital assets like Bitcoin and Ether (ETH) and / or put them in yield farming contracts for annualized returns to achieve.

47,073,663 #USDT (47,073,663 USD) transferred from Compound Tether to unknown wallet https://t.co/FC5ZjNLnRf

– Whale alert (@whale_alert) August 18, 2021

An increasing rate of tether issuance usually coincides with spikes in the Bitcoin market. For example, USDT’s total market cap was around $ 4 billion in March 2020, but rose to over $ 61 billion in May 2021. During the same period, Bitcoin rose from under $ 4,000 to nearly $ 65,000.

Bitcoin price compared to USDT issue. Source: LongHash

Additionally, Bitcoin’s correction from $ 65,000 to $ 30,000 coincided with a flat tether market cap.

BTC later bounced back from new endorsements from Tesla’s Elon Musk and Twitter’s Jack Dorsey and fears of higher inflation led by the Fed’s loose monetary policy.

Meanwhile, Glassnode data reports that 20% of Tether’s offering is currently locked into smart contracts from decentralized finance projects.

USDT offer in smart contracts (pink) vs. rival USDC (green). Source: Glassnode

“I assume that Tether will continue to virtually” print “more and more Tether (mint) as the crypto industry continues to grow,” said Gustavo De La Torre, Business Development Director at N.exchange, and indicated a possible market boom that could follow in the upcoming meetings.

“The growing supply suggests that the crypto ecosystem believes in its own system and is finding a means to peg trading pairs to an asset other than the US dollar.”

Commercial holdings

In June, JPMorgan Chase analysts found that Tether’s large holdings of commercial paper show banks are unwilling to accept the company’s money. This could be due to the policy of the US Office of the Comptroller of the Currency, which instructs banks to only work with stablecoin issuers whose coins are 100% covered by reserves.

Tether reserve allocations from the May report. Source: Tether

The banking giant added that providing tethered banking services to financial institutions “would likely raise reputational risk concerns.” However, Stuart Hoegner, General Counsel at Tether, dismissed JPMorgan’s outlook, stating:

“In terms of reputation, we see the opposite: More and more counterparties feel comfortable with Tether and our transparency initiatives and would like to work with us.”

Regulation clock

Tether’s $ 64 billion milestone also appears to be that stablecoins in general are attracting more intense scrutiny from regulators.

The U.S. Treasury Department, the Securities and Exchange Commission, and the Federal Reserve have raised concerns about the potential of dollar-pegged digital assets to cause global financial instability and obscure transactions related to money laundering and other online criminals.

Related: SEC Chairman Says Cryptocurrency Comes Under Security-Based Swaps Rules

But for De La Torre, crypto traders have ignored regulatory threats to the feasibility of stablecoins as a product. He said:

“Should regulatory pressure increase, other well-regulated stablecoins like USDC could dominate American markets, but Tether will continue to be relevant in other regions of the world.”

Bob Reid, CEO and co-founder of Everest, also highlighted Circles USD Coin’s attempt to lure the US market into a mousetrap by trying to obtain a national banking charter. The executive found that Tether could take a similar route to gain legitimacy in the US or to be ousted from the country altogether.

“Tether is risking just like Binance, an eschewed nomad whom half the world’s governments hate,” he told Cointelegraph.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.


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