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How has the Market Share of Different Stablecoins Changed? Why is the Scandalous USDT so Popular?

Neironix
September 23, 2019 12:00 AM
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How has the Market Share of Different Stablecoins Changed? Why is the Scandalous USDT so Popular?

What are stablecoins? These are tokens on the blockchain that are tied to traditional currencies, for example, to the dollar or euro. At the same time, their value remains unchanged. It means that such coins can be used as a tool in investing and are not considered an investment asset.

The development of stablecoins

Stablecoins appeared at the end of 2014 on the BitShares platform. Then the whole family of such coins was created: bitCNY, bitUSD, bitEURO. These coins are tied to Chinese yuan, US dollar and euro, respectively. However, bitCNY had the highest capitalization, which amounted to $ 75,000 at that time. The coins occupied the entire stablecoin market, because these were the first coins of their kind.

But this situation did not last long. Later, at the beginning of 2015, Tether (USDT) appeared. It was created on the OMNI platform. And its initial capitalization was $300,000, which allowed the coin to occupy immediately three-quarters of the stablecoin market. In just a year, the share of USDT rose to 95%. By the way, the market capitalization was $1.5 million. Over the next two years, USDT capitalization had increased on several million dollars per month.

Since mid-2017, the market share of USDT has increased many times. It has broken the mark of $ 2 billion in just a few months. At that time, there were rumors that USDT capitalization was not proved by real money. Besides, one of the largest cryptocurrency exchanges in the world, Bitfinex, was involved in the case. Bitfinex helped Tether and conducted secret negotiations with it.

Afterwards the large-scale investigation of the activities of Tether, which issued tokens, and Bitfinex had begun. As a result, the Tether reputation had been damaged. Moreover, the level of trust to the company had decreased, even despite the positive outcome of the case.

Then, a large-scale launch of stablecoins began in the world. In just one month, three new coins were issued: USD Coin (USDC), Paxos Standard Token (PAX) and Gemini USD (GUSD).

New stablecoins continue to appear. Today, there are 11 coins on the market with a capitalization of $3 million. The other coins have got smaller marks of capitalization.

Until the beginning of 2018, USDT occupied 97% of the entire stablecoin sector. After the scandal, in January 2019, this indicator fell to the level of 69.5%. And then USDT returned to 80%. However, this does not mean that the crypto community began to trust this coin again. Tether issued coins for $2 billion, thus increased the market capitalization of the stablecoins by 50%. The remaining coins also issued new tokens, but their number was much smaller, which led to well-known consequences.

The stablecoins became very popular, so the industry leaders, also, announced the launch of their coins, which are tied to the dollar in a 1: 1 ratio. Binance and Huobi plan to create their stablecoin, too.

What is more, Tether got a lot of news regarding its coin. Creators transfer tokens from the Omni blockchain to the Tron, Algorand and Ethereum networks. Besides, the company plans to tie a USDT to a basket of commodities, which will include gold, oil and rubber, to reduce the risks of keeping fiat currencies in centralized banks.

As you can see, the scandal with Tether influenced not only on the growth in number of new stablecoins, but also on changes within the company. Now, USDT will diversify not only for different blockchains, but also for various attached assets. Perhaps, this step will help to restore confidence in the coin.

Analysis of the current stablecoins market

USDT is the undisputed leader in capitalization among all stablecoins. It's market share is almost 80%, and is estimated at $ 4 billion. The closest competitor is USD Coin, whose capitalization is ten times smaller than the leader. In addition to the already mentioned, only two coins have a capitalization, exceeding at $100 million. These are Paxos Standard Token (PAX) and TrueUSD (TUSD).

The bad marks have been shown by the volume of stablecoins. The marks of USDT is 37 times higher than the marks of TUSD. It is easy to calculate that 94% of all stablecoin trades are in USDT. Such a phenomenally high rate suggests that whatever problems Tether has, traders and investors continue to use it. Perhaps this is due to the ‘youth’ of other stablecoins, half of which are not even a year old, and the level of trust in them is even lower.

Another significant indicator in the market is liquidity. We wrote about it in this article

The following data looks surprising. BitCNY takes the first place with a liquidity ratio of 2188%, which is 6 times more than that of USDT. As you remember, bitCNY is a stablecoin tied to RMB. If you open the chart of the coin, than will see that since the beginning of 2019, its trading volume has grown in 20 times, which has led to an increase in the liquidity of this stablecoin.

But why did this happen? Since the beginning of 2019, the Chinese government has been interested in the crypto industry. It was announced the creation of a national cryptocurrency in summer. There is the largest number of patents in the field of blockchain in this country. This news triggered bitCNY trading volume.

If we pay attention to other stablecoins, we will see that their liquidity is also quite high, especially in comparison with other cryptocurrencies. After all, the vast majority of coins and tokens cannot boast a liquidity indicator even of 1%! And this fact tells us that currently stablecoins are used, first of all, as a bridge between traditional assets and cryptocurrencies. In addition, many investors and traders use them to protect funds during drawdowns. The infographic shows that the liquidity indicator of three stablecoins reaches about 2%. This means that they are not popular enough, although some of them are traded on very large exchanges.

In conclusion

As you can see, the stablecoin market is growing from year to year. Nowadays there are new coins, issued by various companies on new platforms. Nevertheless, today all of them lose to the undisputed leader of this segment —  USDT, which, despite its tarnished reputation, remains at the peak of popularity.