The banking sector may require a much-needed overhaul, but until then, investors are seeking a safety net. With the Credit Suisse turmoil and the collapse of several US banks, investors have turned to the largest stablecoin, Tether (USDT).
The turmoil has once again increased the popularity of the controversial asset.
Tether Market Cap
This year, Silicon Valley Bank (SVB), Signature Bank, and Silvergate Capital- lenders that formerly collected deposits from crypto companies, have all collapsed in a relatively brief period. The demise of these entities exposed the instability of stablecoins.
Fintech company Circle acknowledged a $3.3 billion exposure to SVB, causing its USDC token to drop to 88 cents instead of its normal one-dollar value. The token has since increased back to its initial value thanks to US regulators ensuring that the deposits in Silicon Valley were safe, while Circle promised financial support.
USDC is the second-largest stablecoin and is widely used in decentralized finance (DeFi). While recent events did not translate into a Terra-like catastrophe, the danger was significant, further exacerbating the stablecoin crisis. As a result, USDC’s market cap fell by almost 21% this year.
Binance USD (BUSD) saw a similar trend, with regulatory agencies in the US dealing it several setbacks this year. BUSD’s market cap has decreased by over half, to just over $8 billion.
On the other hand, Tether’s market cap has reached levels not seen since May 2022. In fact, USDT’s value has continued to rise steadily since its massive drop that month, and it has even reached more than $77 billion. As investors rely on the asset more than ever, it has increased by over 17% year-to-date.
Stablecoin sentiment has undergone a drastic shift from last year when investors, spooked by the Terra crash, rushed to redeem billions of tether and switch to USDC. This time around, however, USDT has emerged as the go-to choice for the industry, despite concerns about the asset’s backing and its parent company, Tether Global.
The performance can be attributed to the fact that Tether has confirmed having no exposure to SVB or Silverbank. In another significant sign, Tether’s stablecoin dominance is at its highest level in 18 months, accounting for 60% of the market share, according to Glassnode data.
Although it is still early to say whether USDT will emerge as the safety net for investors in times of turmoil, its ability to maintain stability during adverse market conditions may have proven that it will not be toppled from its lead anytime soon.