The financial crisis in the traditional market was looming large even before Coronavirus pandemic came into the picture. The virus outbreak across the globe sent the market on a free fall and even Bitcoin experienced a scare with a massive fall of almost 50% within 24-hours. Bitcoin was supposed to outshine the traditional market at such times which it is as it has not been on free fall like other markets. However, one crypto token almost seemed to have gained and added $2 billion worth of market cap during these troubled times.
While Bitcoin’s market cap has decreased by 37% since mid-February, Tether has seen an increase of 38% in its market cap. Tether, a stablecoin pegged against the US-Dollar has seen many takers in the times of this financial crisis. Many market pundits and analysts believe that in these times of financial uncertainty and high volatility in the crypto market, stablecoins have gained a lot of traction.
Nic Carter, co-founder of crypto market tracker Coin Metrics believe that investors have been attracted towards the US Dollar and stablecoins like Tether’s USDT has become a prominent source for investors to get their hands on the digital equivalent to the US Dollar. However, Tether has also been at the center of many controversies especially over the issuance of the USDT, which they claim is based on consumer’s demand, but many believe it’s not transparent enough and the firm has been involved in many lawsuits because of that.
Earlier Tether has claimed that each USDT token is backed by the one US Dollar, however, it has refused to get audited by a third-party and during the BitFinex lawsuit, it accepted that only about 70% of its issuance is backed by the US dollar and also removed the claim from its website.
Tracking Tether is Getting Harder
Over the past couple of years, Tether has started issuing its stablecoin on a variety of ledgers which has made tracking of its stablecoin even harder than it has been in the past. Carter said,
“Anecdotally, some non-U.S. traders have told me that they actually prefer the more lightly surveilled Tether because they feel that it’s less likely that their coins get arbitrarily frozen for violating the terms of service.”
Tether has also been accused of manipulating and pumping Bitcoin prices on many occasions as many have pointed out that every time Bitcoin price has fallen significantly Tether releases a new batch of stablecoins which has often led to a rise in Bitcoin price. Tether has denied such claims while analysts haven’t been able to gather enough information to back those claims.
Whatever may be the case with its issuance, nobody can deny its dominance in the crypto market as USDT alone has captured over 95% of the stablecoin market over the years and no one has ever come close to dethrone it despite the slew of accusations around it.