In the first quarter of 2023, the stablecoin Tether’s market capitalization surged by $15 billion, breaking its previous record set in May 2022.
As reported by the cryptocurrency explorer CoinMarketCap, USDT’s market capitalization surged by over 20% in the first three months of the year, reaching an all-time high of $80 billion.
This brings it just $3 billion short of its all-time high of $83 billion last year.
The increase in USDT capitalization was driven by growing concerns among crypto traders about the legal status of alternative stablecoins, such as USD Coin (USDC) and Binance USD (BUSD), in the United States.
USDC’s market capitalization has been declining due to its losses of over $3 billion, which were invested in troubled banks Silicon Valley and Silvergate.
Meanwhile, BUSD has been hit by the New York State regulators’ order to Paxos to stop issuing the stablecoin.
In contrast, Tether has reassured its users that it is not a US-based company and is not affected by the insolvency of any US bank.
According to Markus Thielen, the head of research and strategy at crypto services provider Matrixport, the surge in Tether’s capitalization can also be attributed to the “aggressive minting and issuance of an asset” in the Tron network, which is in high demand in mainland China.
Tether issued on the Tron network accounts for more than half of the stablecoin’s current market value, according to Matrixport.
The increase in USDT’s market capitalization coincided with a general drop in the supply of stablecoins on exchanges.
Glassnode analysts reported that the total balance of stablecoins on trading floors has dropped by 41% since the start of the year, to $22.31 billion.
As the decline in stablecoin exchange reserves coincides with the cryptocurrency market rally, Glassnode experts suggested that traders may have converted their cryptocurrencies into fiat currencies or used them to buy bitcoins.
Finally, the market capitalization of Tether Gold (XAUt), a stablecoin linked to the price of gold, rose to $499 million, while its closest competitor PAX Gold (PAXG) tokens hit $523 million.