Bitcoin (BTC) Now Relies on Tether (USDT) for Most Activity
The share of USDT in BTC trading has been growing steadily, setting a record on Monday at over 81% of all trades.
Bitcoin (BTC) is exhibiting a previously unseen trading profile. On the surface, the leading coin displays short-term rallies and relatively high volumes of over $9.7 billion equivalent in 24 hours, but the actual trades contain very slim shares of fiat currencies. According to CryptoCompare data, the expansion of Tether (USDT) trading continued in the past weeks to reach the point where more than 81% of all BTC deals happen against the top stablecoin.
This also means that BTC prices are becoming more isolated into the crypto space, with very slim fiat inflows and difficulties in cashing out in fiat.
The Tether stablecoin has now spread to even more exchanges, Binance remaining one of the leading wallets. Exchanges like Exrates are also fueling the brisk trading tempo.
According to Stablecoinswar, a site tracking the performance of leading stablecoins, the “velocity of money” for USDT is 415%, meaning that each day, the entire supply of USDT is turned over roughly four times. Currently, there are about 2 billion USDT in circulation, with no new coin printings recently.
The dominance of USDT in both BTC markets and altcoin pairs is once again raising concerns. Even at a lower predominance, the presence of USDT sparked criticism that the BTC market could be manipulated. Now, almost the entire market is dependent on stablecoin activity, in effect making BTC prices a derivation of USDT speculation.
According to Untether, a site tracking USDT behavior, the premium as of 7:30 UTC on Monday was $96.96, in effect meaning that USDT is only marginally below its dollar peg. For now, the stablecoin manages to remain close to $1, with no new crashes since the slide to $0.85 in October 2018.
But as BTC prices are awaiting recovery and a regulatory decision on US-based exchange-traded funds (ETF), the fact that BTC to fiat trading is now extremely illiquid may trigger skepticism in mainstream financial circles.
Still, USDT is creating a new season of speculation as trading activity remains high, and altcoins are also seeing a boost from the more active USDT markets. The Japanese yen, which previously carried as much as 60% of BTC volumes, is now responsible for around 6% of activity, and the US dollar accounts for a slim 5.44% of trading.