End of USDT Dominance? New Competitors Threaten the Leading Stablecoin
In the volatile cryptocurrency market, stablecoins, which are cryptocurrencies pegged to stable assets like the US dollar or the Euro, remain a safe haven for investors. Tether (USDT), the largest digital stablecoin, is facing stiff competition that threatens its market dominance.
Increasing Momentum for Stablecoins as Bitcoin Values Decline
With the decline in Bitcoin (BTC) value and the digital currency market entering a correction phase, stablecoins are gaining increased momentum among investors. Their relative stability and linkage to reliable assets like the US dollar make them an attractive alternative during extreme market volatility on trading platforms.
Currently, stablecoins backed by the US dollar and the Euro account for the majority of digital currency transactions, capturing 82% of the total trading volume compared to just 18% for cryptocurrency trades against traditional currencies.
Market Dynamics and New Challenges
While the digital currency market is growing tremendously, Tether (USDT), crowned as the leader among stablecoins in terms of market value, faces increasing pressures that threaten its dominance, especially in the evolving market dynamics and new challenges it faces.
According to a study by Kaiko Research, Tether's (USDT) market share in central exchanges (CEX) has significantly declined. In numbers, Tether’s market value has dropped from 82% to 69% since the beginning of 2024.
Threats to Tether's (USDT) Dominance in the Stablecoin Market
Although the competition in the stablecoin market has already intensified with the entry of new players like FDUSD, Tether still maintains its dominance in terms of trading volume, with more than $3.6 trillion traded in 2024 alone, surpassing its closest competitors like USDC from Circle and FDUSD from First Digital.
Adding to Tether's challenges is the increasing interest of investors in regulated stablecoins like USDC and PYUSD, which are subject to U.S. money transfer regulations. This forms a significant factor in undermining USDT’s control. For instance, the market share of USDC has risen from 1% in 2020 to 11% today, indicating a growing preference for currencies that offer more security backed by law. Meanwhile, the market value of PYUSD has risen from $44 million at the beginning of last September to $327 million at the time of writing this article.
The emergence of innovative solutions like USDe from Ethena, a yield-bearing stablecoin, could also weaken Tether's position. USDe, launched in February last, has seen a significant rise in trading volume, surpassing that of USDC during the same period.
Ultimately, the stablecoin market is experiencing tremendous growth, driven by investors' desire for a safe haven amid cryptocurrency volatility. While Tether (USDT) is undoubtedly the leader in this area, it faces increasing challenges, including security concerns, regulatory pressures, and the rising popularity of regulated stablecoins like USDC and PYUSD.
