The Relationship Between Stablecoins and Crypto Asset Prices: Tether Mints 1 Billion USDT Tokens on Ethereum

Introduction

There has been a recent surge in the number of stablecoins, particularly Tether (USDT), which is the largest and most commonly used stablecoin in the cryptocurrency market. Tether has recently minted 1 billion new tokens on the Ethereum network, causing some to speculate about the correlation between stablecoin supply and the value of crypto assets. This article will explore this relationship in greater detail.

USDT Reigns Supreme

Tether has minted 1 billion new USDT tokens in order to bolster its inventory and ensure that it can meet requests to issue new tokens in the future. At present, USDT is the largest and most commonly used stablecoin in the cryptocurrency market, with trading on cryptocurrency exchanges frequently taking place in pairs between crypto assets and USDT. The number of USDT tokens on the Ethereum network currently stands at over 35 billion, which is significantly higher than any other stablecoin on the market.

The second largest stablecoin, USD Coin (USDC), has slightly less than 30 billion tokens on the Ethereum network. The official stablecoin of the cryptocurrency exchange Binance, Binance USD (BUSD), is in third place with fewer than 7 billion tokens. However, earlier this year, BUSD faced heavy accusations from U.S. regulators, prompting the exchange to stop issuing new tokens.

While USDT and USDC are neck and neck on the Ethereum network, taken across all blockchains, USDT is the dominant stablecoin by far, with a total of 81.5 billion tokens in circulation. In contrast, USDC has fewer than 30 billion tokens in circulation.

Dominance on the Rise: Good News?

Tether’s issuance of 1 billion new USDT tokens has further increased its dominance in the stablecoin sector, which has grown significantly since the beginning of this year. While both BUSD and USDC have suffered setbacks, Tether has taken advantage and captured a greater share of the market.

Some experts believe that the increase in the supply of USDT is actually good news for the cryptocurrency market, as there is a strong historical correlation between USDT supply and the price of Bitcoin. Tether issues new tokens when it anticipates an increase in demand, which means that new money enters the system and is typically used to purchase Bitcoin, Ether, and other crypto assets. As Simon Cousaert of The Block explains, “Tether issues new USDT when it expects growing demand for it. This means new money is entering the system, which is generally used to buy bitcoin, ether, and other cryptocurrency assets”.

Conclusion

The recent issuance of 1 billion new USDT tokens on the Ethereum network by Tether has stoked speculation about the relationship between stablecoin supply and the value of crypto assets. While some experts believe that the increase in the supply of USDT is a good sign for the cryptocurrency market, others warn that the issuance of new tokens could lead to volatility and instability in the market. Regardless, Tether’s dominance in the stablecoin sector is likely to continue in the short term, and it will be interesting to see how this affects the value of crypto assets moving forward.