The high volume of Tether transactions is indicative of massive interest in stablecoins. Despite the challenges faced by the crypto industry, stablecoins have flourished, especially in those countries where the current economic situation has put the national fiat currency at a disadvantage.
Tether has had a difficult year
Despite the rise in popularity of stablecoins, Tether has had a challenging year. Concerns have been repeatedly expressed by members of the crypto community about the company’s reserves and solvency, especially since the collapse of Terra UST in May, when USDT briefly lost its peg to the US dollar. During that period, the stablecoin's market capitalization fell by $10 billion, and several traditional financial institutions opened short positions due to speculation around the financial condition of its issuer.
USDT dominance in the crypto market has declined
Although USDT remains the No. 1 stablecoin, USDC and BUSD are actively catching up. For comparison, the market value of Tether during the reporting period decreased from a peak of $83.13 billion to $65.31 billion, while USDC capitalization rose to $56 billion.
Some centralized crypto exchanges such as Coinbase have encouraged their users to convert USDT to USDC. By the end of 2022, USDC transfer volumes exceeded USDT by almost five times, according to Glassnode data. This suggests that investors consider it a safer option.
USDC assets are backed by cash or short-term US Treasury bills, and USDC is audited by international audit firm Grant Thornton. Tether management, on the other hand, is not very open about its reserves and audit.
All this made the crypto community members question Tether data on trading volume in 2022. Some explained these figures as “laundering” trading, others asked the stablecoin issuer to publish their reserves.