Tether’s store of value could be greater than the one of Bitcoin according to the latest reports that we have in our Tether news today.
USDT has seen some huge growth since the start of the year and the market cap of the biggest stablecoin reached $10 billion according to the latest data that we are reading about in our tether news. The market cap almost doubled this year and the amount of economic value enabled through the biggest ETH-based token went parabolic. The ongoing increase in USDT adoption raised discussions about the importance of the asset to the bigger BTC crypto market.
Major changes in Tether's Market Cap have led Bitcoin's price over the last 1.5 years.
5 January 2020 was no different.
A healthy signal.
Keep it printing 🖨️ pic.twitter.com/dfe0dBJzwh
— Charles Edwards (@caprioleio) January 13, 2020
According to Willy Woo, the popular bitcoin analyst, there is a chance that there are more dollars than support USDT than there are supporting Bitcoin which turns out that Tether’s store of value is actually different. This could seem illogical as Bitcoin’s market cap is about 2000 percent bigger than the one of USDT. As Woo explained, analysts such as Thomas Lee from Fundstrat, found back in 2018 that every dollar invested in bitcoin, the market capitalization increases by $25. Assuming that the analysis is correct, Bitcoin’s real market cap in dollar terms is closer to $7 billion.
The discrepancy is what was dubbed as a fiat amplifier and the existence of this amplifier is the byproduct of the liquidity of the market. Alex Kruger explained:
“Invest a relatively large sum in a small asset (in $ terms), where additionally a significant fraction is not liquid (i.e. does not trade, sits off exchanges) => prices skyrocket. Fixed supply compounds the impact.”
Surprising food for thought.
BTC Cap: $172b
Tether Cap: $10b
These 2 caps are different. Every dollar in Tether's cap stores a dollar (assumes full backing), while @fundstrat calculated in 2018 BTC cap rises $25 per dollar invested.
Tether could be storing more value than BTC.
— Willy Woo (@woonomic) July 22, 2020
He further suggested that USDT could be of more importance to crypto than it is to the low market cap. About $24 billion worth of the asset was traded in the past 24 hours while Bitcoin’s trading volume was set at $17.97 billion over the same time frame. Woo’s takeaway was that stablecoins are becoming an increasingly important force in the crypto ecosystem despite the heavy criticism inside the industry:
“Commenters didn’t like these objective data points and missed the point that stablecoins are increasingly used for transmission of funds and securitising trade settlement. It’s not just used for hedging from bearish crypto price action like the old days.”
Behind the growth of the DeFi ecosystem, there are a lot of ongoing trends and some of these trends include the spike in demand for US dollars, increase in investors that want to hedge their bitcoin, and increased adoption of decentralized finance. With all this being said, it seems that USDT is not of crucial importance to the entire market and broader industry.
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