Synopsis
Tether, the stablecoin, is becoming the least risky cryptocurrency asset as demand to buy grows due to increasing concerns about mainstream bank stability and regulatory clampdowns in the cryptosphere. As such, the coin’s perceived safety from the SEC and its ability to store value is helping it thrive and it is now ranked number three on the CoinMarketCap database with a market cap of $82bn. However, Tether has long been under suspicion as doubts about its $1 peg being backed by dollar reserves have arisen.
Digital stablecoin tether is winning the race for the title of the crypto world’s “least risky” asset.
As a regional U.S. banking crisis widens and a regulatory crackdown on crypto firms deepens, investments within the cryptosphere are moving into tokens and coins perceived as relatively safe.
Tether is already the top performer among stablecoins — digital tokens pegged to some fiat asset like the dollar — and has seen its market value soar since March.
Its value is anchored by a 1-to-1 peg against a cache of dollars and a supply cap at around 85 billion tokens. Demand for the coin has been so strong that its peg has held above 1 since mid-April, hitting 1.002 last week.
Did you Know?
S has launched a new enterprise on the Metaverse with the aim of accelerating cloud adoption among Indian firms. The interactive and immersive ‘cloud on wheels’ platform will enable customers to experience the full range of S ’s offerings and reimagine processes for improved business outcomes.
View Details » “The banking crisis is fuelling ‘hyper-bitcoinisation’ – the inevitable endgame that the dollar will be worthless,” said Anders Kvamme Jensen, Oslo-based founder of the AKJ global brokerage and digital asset specialist.
That has spurred a flight to top cryptocurrencies such as bitcoin and ether, Jensen said.
GR HIC – Tether’s trust
https://www.reuters.com/graphics/FINTECH-CRYPTO/WEEKLY/klvyglqgqvg/chart.png
Pegged stablecoins such as tether, meanwhile, are seen more as a store of value and as a tool to facilitate transfers between cryptocurrencies and also serve as collateral for derivative trades.
Conor Ryder, research analyst at digital assets data provider Kaiko, says tether’s premium reflects emerging trust in both the peg and in its perceived safety from the U.S. Securities and Exchange Commission (SEC).
Tether is owned by iFinex Inc, a company registered in British Virgin Islands which also owns the Bitfinex cryptocurrency exchange.
Tether’s main rival USDC, managed by Boston-based Circle, has been hurt by the revelation of its exposure to collapsed Silicon Valley Bank and the SEC’s scrutiny of fintech and crypto firms.
Another major stablecoin, BUSD, or the Binance USD token, has seen a decline since its developers said they would cease issuing new tokens after U.S. regulators labelled the asset an unregistered security.
The DAI token has been bogged down because of its unusual peg to reserves that include other stablecoins and crypto currencies.
“Tether is seen as less U.S.-oriented, meaning lower regulatory risk. Buying tether and bitcoin is really a vote against the U.S. system,” says Jensen.
On CoinMarketCap’s database of 23,891 tokens, tether has risen to number 3 with a market cap of $82 bln and a share of 6.83%.
NO NEWS IS GOOD NEWS
To be sure, tether has long been dogged by doubts about its peg being backed by dollar reserves. All stablecoins were hurt last year during a series of events such as the collapse of crypto hedge fund Three Arrows Capital, which followed the de-pegging of Terra USD and the failure of crypto exchange FTX.
“The interesting paradox here is that tether has become the industry’s most trusted stablecoin,” says Ryder.
“Tether’s safe haven status differs from bitcoin in that it is providing a safe peg to $1, one of the only stablecoins in the space that can make that claim at the minute. Bitcoin on the other hand is seen as a safe haven from monetary debasement as a form of money that is ‘outside’ the banking system.”
Bitcoin too has rallied some 73% this year, after hitting resistance around $31,000 last month.
(Editing by Sam Holmes)
Tuesday, 09 May, 2023Experience Your Economic Times Newspaper, The Digital Way!Read Complete Print Edition »
- Front Page
- Pure Politics
- ET Markets
- Smart Investing
- More
-
Govt Mulls New Framework to Put IBC Cases on Fast TrackThe government is considering a creditor-led insolvency resolution mechanism under the bankruptcy law to fast-track settlement and ease the burden on the National Company Law Tribunal (NCLT), people aware of the development said.
In ‘Reverse Flip’, Razorpay Parent Returning to IndiaBengaluru headquartered digital payments firm Razorpay is in the process of moving back its parent entity to India from the US, amid tighter sectoral regulations, said two people aware of the matter.The development comes months after Walmart-owned online payments firm PhonePe shifted its holding company to India from Singapore.
GST Violations Case: MoF Refuses to Act on Insurers’ Plea, Refers Matter to IrdaiThe finance ministry has declined to intervene in a plea for relief made by the insurance industry, which is facing penal action from tax authorities for goods and services tax (GST) input tax credit violations.