The Ups and Downs of Tether's Market Capitalization
Tether (USDT) has seen its fair share of volatility when it comes to its market capitalization over the years. As one of the most widely used stablecoins pegged to the US dollar, changes in the total supply of Tether often reflect major events in the cryptocurrency market. By examining the surges and declines in Tether's market cap, we can better understand the growth and challenges faced by this prominent digital asset.
A Stablecoin Backed by Controversy
Tether was launched in 2014 as Realcoin before rebranding to its current name. It emerged as one of the first stablecoins, designed to maintain a value of $1 per coin through fiat currency reserves. Tether lays claim to be 100% backed by actual dollars and other assets, though this has been called into question many times. Despite the controversies surrounding its reserves and issuance practices, Tether remains one of the most traded cryptocurrencies by volume.
The steady growth of Tether's market cap from 2015 to 2017 coincided with increasing Bitcoin prices and demand for crypto trading options. However, in early 2017 the first of many sudden declines occurred when $31 million USDT was stolen during a hack, causing Tether to hard fork and isolate the stolen tokens. Nevertheless, it took less than a month for Tether to recover the loss and return to $55 million in market capitalization.
Explosive Growth and the 2018 Collapse
After reclaiming its market cap following the 2017 hack, Tether saw exponential growth throughout the crypto frenzy of late 2017. Its market cap skyrocketed from around $450 million in September to $1.4 billion by the end of November 2017. This aligned closely with Bitcoin reaching its all-time high of nearly $20,000 at the end of the year.
However, in early 2018 Tether's market cap came crashing down as concerns emerged over whether it truly had the fiat reserves to back each USDT 1:1 with USD. In just 60 days from January to March 2018, Tether's market cap plunged from $2.28 billion down to $1.42 billion. Questions around transparency and reliance on reputable banks continue to impact Tether's market cap volatility to this day.
Surviving Crypto Winters and Scrutiny
Despite the collapse in early 2018, Tether was able to build its market cap back up over the next year, though still punctuated by periods of steep decline. It generally remained stable in the $2-4 billion range until early 2020 when it started climbing rapidly once again.
This growth aligned with the renewed crypto and Bitcoin boom in 2020-2021. By May 2021, Tether had exceeded $60 billion market cap for the first time. However, concerns around USDT reserves emerged again, coinciding with a steep correction cutting its market cap in half by mid-July 2021.
Tether survived yet another crypto winter in 2022 as its market cap declined to around $65 billion, far lower than its all-time high above $83 billion. But despite ongoing scrutiny from regulators and questions around its reserve holdings, Tether has maintained its position as the dominant stablecoin in crypto trading markets.
Looking Ahead at Stablecoin Competition
Tether has achieved remarkable growth since its inception, despite volatility around regulatory concerns. However, its future is unclear as stablecoin competition heats up. Rival stablecoins like USD Coin (USDC) are becoming more trusted and widely adopted across exchanges and DeFi protocols.
As one of the earliest stablecoins, Tether transformed crypto trading with its promise of low volatility pegged to fiat. But its lack of transparency around reserve holdings continues to make USDT controversial. Does Tether have the reserves to weather further declines? Or will emerging transparent and regulated stablecoins slowly chip away at its market share? Only time will tell, but Tether's story highlights both the massive potential and risks associated with stablecoins.
