While the coronavirus pandemic has hammered the price of Bitcoin and the crypto market at large, Tether (USDT) has managed to increase its market cap by nearly $2 billion since mid-February.
Over the last month and a half, the controversial stablecoin rose 38% in market cap, while BTC plummeted by 37% over the same time period, according to statistics from crypto research firm Messari.
Designed as a stablecoin pegged to the dollar, traders use Tether (USDT) as a way to escape crypto market volatility. Because of that function, it’s now the most widely traded cryptocurrency in the world, ahead of Bitcoin.
Increased reliance on Tether, however, could spike the volatility of other cryptocurrencies, according to Sid Shekhar, co-founder of market tracker TokenAnalyst.
Shekhar tells Bloomberg,
“The more Tether there is in existence (and specifically the more sitting on exchanges), the more there is opportunity for sharp swings in price as traders can immediately buy in (or sell out) as opposed to the slower process of converting sending and fiat into crypto. This naturally lends itself to increased volatility.”
The Hong Kong-incorporated company says it mints new USDT at times of increased interest and trading volume, although it has been accused of minting new tokens simply to try to boost the price of BTC.
Tether also faced controversy a year ago when its website was quietly updated to state that the coin’s reserves may at times may be comprised of assets other than the US dollar, a major deviation from initial claims that Tether is 100% backed by the US dollar.