If Tether Teeters, Which Stablecoin Will Take the Throne?
In the face of growing market competition, which stablecoin will have the last laugh?
Review of the Tether Crash
Rumors about Tether’s banking problems spread several days before the massive sell-off, leaving the stablecoin on the verge of collapse. On October 14, Tether (USDT) had a market cap of $2.48bn, circulating supply of 2.5 billion tokens and a trading volume of 2 billion.
Looking at the other U.S. dollar-pegged stablecoins, TrueUSD (TUSD) and Dai (DAI) held the top two spots for circulating supply, reaching 135 million and 60 million respectively. Paxos (PAX) led the other stablecoins in trading volume, posting a daily volume of 20 million, followed by TUSD (12 million) and DAI (4 million).
Yet the dominance of USDT was unwavering. It outcompeted all the other stablecoins across all crypto indices, with a market cap of 91.69% of the USD-pegged stablecoin market and trading volume of 98.19% on October 14.
The Tether stablecoin suffered huge losses on October 15. The trading volume of USDT increased sharply to 5 billion, while its market cap sunk a staggering $200m to $2.4bn, reducing the circulating supply of Tether tokens by more than 200 million. The Bitcoin price, however, surged on the same day, taking the major altcoins on a roller-coaster ride, bringing great disruption to the market.
Meanwhile, the other stablecoins went into panic mode as they scrambled for their market share. The Circle USD stablecoin (USDC) led the way and increased its supply by 75% by issuing 10 million tokens on October 15, becoming the center of attention.
Other U.S. dollar-pegged stablecoins were busy increasing their circulating supply on October 16, trying to grab more market share. PAX and TUSD outnumbered other stablecoins by boosting their supply by 26 million and 23 million tokens respectively. The market cap of U.S. dollar-pegged stablecoins (excluding USDT) rose from 8.31% on October 14 to 12.28%, sustaining an upward trend in the days that followed. The majority of stablecoins also doubled their trading volumes—TUSD’s surged from 12 million on October 14 to 40 million on October 15, while that of GUSD soared from 40,000 to 1 million.
Public attention had already dwindled by October 22, one week after the crash, along with the weakening dominance of USDT. With a volume of around 2.2 billion, USDT saw its market cap fall to $2bn, accounting for 84.92% of the total market cap for stablecoins. TUSD and PAX still held on to favourable positions among the other USD-pegged stablecoins as TUSD posted a market cap of $160m and PAX $82m. PAX managed to secure a record trading volume of 40 million, whereas other stablecoins saw a decline in volume to some degree.
Tether burned 500 million tokens on October 25, decreasing its total supply from 3.08 billion to 2.58 billion. There were around 1.9 billion Tether tokens in circulation at that time.
On November 5, three weeks after the flash crash, USDT saw a sustained downward trend on the whole. With its market cap dropping by $900m to $1.7bn, USDT’s share of the USD-pegged stablecoin market also shrank by nearly 15% to 76.73%.
As shown in the following tables, a lot of capital has flowed from USDT to other USD-pegged stablecoins. They have also grabbed more market share from Tether.
(USD-pegged stablecoin market share)
(Market share of some stablecoins)
The majority of stablecoins have seen a continuous increase in total supply since October 15. But the total supply of some stablecoins has begun to decrease since last weekend.
The preferred stablecoin for exchange listings is PAX, which is listed on 27 exchanges, followed by TUSD (26) and GUSD (19). PAX and TUSD have interacted with exchanges more frequently, with the peak number of both deposits and withdraws hitting 10 million tokens, followed by GUSD and DAI that remain at 1 million tokens.
In terms of addresses, PAX is more active on Binance and Huobi. Six of the top ten PAX addresses belong to these two exchanges.
TUSD has been traded in a more dispersed manner, with its top ten address spread among different exchanges, including Binance, Bittrex and OKEx.
Among all stablecoins (excluding USDT), the early mover TUSD has continued to have an impact on the market. Yet the influence of PAX, a latecomer released in September this year, should not be underestimated, in view of the sharp increase in its supply and activity on exchanges.
In terms of on-chain transactions and users, PAX, USDC and GUSD have won over more users over the past three weeks. Though USDC and GUSD are far behind TUSD and PAX in terms of market cap, they still boast huge potential to grow in the future.
Though the competing stablecoins are still no match for the market leader—Tether—at the moment, time will tell if there could be a change in the future as other stablecoins become more competitive.
Note: Market quotations and exchange data come from CoinMarketCap and feixiaohao.com, while other on-chain data come from Searchain.io.