The market capitalization of Tether’s USDT surpassed $78 billion, data from industry aggregator Coinmarketcap shows, as demand for stablecoins is up both as a crypto on-ramp and also as a hedge for volatility.
At the time this article was written, Tether — which claims to back its tokens 1-to-1 with the US dollar to ensure stability in value — has the fourth-highest market capitalization of any cryptocurrency, growing 400% since the start of the year. Additionally, the token remains the dominant stablecoin in the industry, accounting for more than 46 percent of the stablecoin market cap.
The ‘Tetherization’ continues at a pace with many crypto exchanges denominating pairs in USDt rather than bitcoin, the token issuer said.
— Tether (@Tether_to) December 20, 2021
Tether’s market cap has been rising all year, driven by the token being increasingly used in remittances and projects in the digital token ecosystem, including those in the decentralised finance (DeFi). For a point of comparison, it took almost 12 months to quadruple from roughly $20 billion to be less than $2 billion away from reaching $80 billion.
Much of this impressive rise was due to the huge interest in decentralized finance (DeFi). DeFi projects and relevant platforms, such as Aave, Compound, and Solana, were behind much of the gain. They tend to use stablecoins such as USDT in DeFi projects because of the lack of volatility.
Bitfinex paid back its $750 million loan facility
During the past year, the total supply of stablecoins shot higher to approximately 170 billion, largely as investors spooked by multiple crashes of major cryptocurrencies. Tether dominance now represents 3.4% of the $2.33 trillion cryptocurrency market capitalization, according to CoinMarketCap.
Earlier this year, Tether revealed a breakdown of its reserves showing that 76% of its holdings were held in cash or cash equivalents. The remaining portion was invested in secured loans, bonds, and other investments that include Bitcoin.
Also in February, Bitfinex allegedly paid back another $550 million to Tether to cover more than 100 percent of its $750 million loan facility they took out two years ago. The stablecoin printer started to repay the loan in 2019 by transferring $100 million to Tether’s reserves.
At the time, Bitfinex stated that the last repayment was made entirely in fiat currency, which adds more backing to USDT tokens, which saw its fiat coverage drop to below 80 percent following the credit line given to its sister exchange.
Bitfinex, who shares a parent company with Tether, was accused of using $750 million from the stablecoin reserves to cover up losses of $850 million.