The Race to Replace Tether (In 3 Charts)

The crypto market has a dominant stablecoin, make no mistake.

Tether, which aims to keep its token (called tether or USDT) at parity with the U.S. dollar by backing each token with $1 in bank deposits, accounts for the vast majority of the stablecoin market by total value, exchange volume and other metrics.

But the market has begun to show signs of anxiety around tether, centering on the firm’s access to banking services and its claims to have fully collateralized the outstanding tether supply.

The token has not traded at $1 with any consistency since early October. It hit a low of $0.85 on one market on Oct. 15, and while the exchange rate has largely recovered, it still lags below target, trading at $0.99 Sunday, according to CoinMarketCap.

Meanwhile, several rival stablecoins have arrived on the market, including – just since September – Circle’s USD Coin (USDC), the Paxos Standard Token (PAX) and the Gemini Dollar (GUSD). Older rivals include TrustToken’s TrueUSD (TUSD) and Maker’s Dai (DAI).

As one might expect in such a perfect storm, tether has begun to lose some market share to these competitors in the week and a half since it broke the buck, data analyzed by CoinDesk shows. Yet while TUSD and USDC have made the biggest inroads, the data shows no clear winner at this stage, and tether remains firmly on top.

All these coins are vying for a critical role in the crypto ecosystem. Stablecoins, in theory, allow traders to move money between exchanges quickly – without having to rely on access to traditional banking. They also allow traders to move their funds into a less risky asset during times of heightened volatility, without having to withdraw funds from an exchange.

Below we dive into the data.

Market capitalization

There are several ways to measure market share for stablecoins, none of them perfect indicators. One is simply by looking at the market capitalization, which, when the asset is supposed to trade 1-for-1 with fiat, should be about the same as the overall supply.

“Tether has definitely lost market share in terms of the supply of USD allocated to different stablecoins,” Nic Carter, creator of the blockchain data site Coinmetrics, told CoinDesk. TUSD and USDC, he added, have been “the major beneficiaries.”

Indeed, according to Coinmetrics data analyzed by CoinDesk, tether’s market capitalization as a share of the broader stablecoin market has steadily declined, with most of that decline coming from a reduction in tether supply (a token’s market capitalization is equal to its price multiplied by its total supply).

market capitalization tether stablecoins
Charts by Nolan Bauerle and Peter Ryan of CoinDesk Research. Data for all charts sourced from Coinmetrics.io. Note that vertical axis scales differ between charts.

“Prior to the run,” Carter said, referring to a period in mid-October when tether’s exchange rate dipped below $0.93 according to CoinMarketCap, “tether consisted of about 94 percent of the total supply in stablecoins; that collapsed to 83 percent after the run.”

But it’s important not to overstate the competitive implications of that collapse. The primary reason for this shift is that Bitfinex – a cryptocurrency exchange that shares executives and owners with Tether – has sent 780 million USDT to a company-controlled wallet known as the Tether Treasury since Oct. 14.

This process, which the company (controversially) refers to as “redemption,” removes tokens from the supply and therefore reduces the market capitalization, which has fallen to around $1.9 billion from a peak of nearly $2.8 billion in September.

Hence, reductions in tether’s supply haven’t benefited rival stablecoins as much as might be assumed, Carter noted. “It looks like some USDT that were redeemed did not, in fact, flow into other competitors, but simply exited to BTC or fiat.”

Volume

Another way to gauge stablecoin market share is to look at what’s happening at cryptocurrency exchanges.

Unsurprisingly, during and shortly after the “run,” a number of exchanges – including OKEx and Huobi – rushed to list alternatives to tether.

Yet Coinmetrics’ data shows only a slight increase in trading volume for tether alternatives over the course of October, and from a tiny base (note that the vertical axis ranges from 96 percent to 100 percent, and tether remains clearly dominant by this metric):

stablecoin exchange volume
Coinmetrics exchange volume data is sourced from CoinMarketCap.

“Exchange volume is small for alternatives because traders aren’t really accustomed to them yet,” said Carter, adding “tether still is considered a useful (albeit risky) coin for traders to get fiat-denominated risk. It just has the accumulated financial infrastructure.”

But there’s one more metric to consider: the volume of transactions on the blockchains for these stablecoins.

By this yard stick, tether alternatives have made more headway. Compared to modest on-exchange volumes, total on-chain transaction volumes were considerably higher for non-tether stablecoins throughout the month, and they appear to have increased after tether broke the buck:

onchain transaction volume tether stablecoins

All told, tether is still dominant, but competition from its many rivals is heating up.

According to Carter, however, “it’s still too early to say which competitor is best positioned to win long term.”


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Author: David Floyd
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First Stablecoin Goes Live on Coinbase as Tether’s Struggle Remains

The popular US-based fiat-to-crypto exchange Coinbase has launched support for the new up-and-coming stablecoin USD//Coin (USDC), issued by Circle.

In a blog post, Coinbase said it is the first time they have ever added support for a stablecoin, while listing up benefits of the USDC, including improved send and receive functionality between wallets, convenient use in decentralized applications (dapps), and an easier way to store value than using physical US dollars.

Speaking at the Money 20/20 conference in Las Vegas on Tuesday, Coinbase president & COO Asiff Hirji said that the new stablecoin is “backed one to one with the US dollar, completely audited, completely transparent.”

USDC is a token created on the Ethereum blockchain, which means that it can be stored on, and transferred between, any wallets that are compatible with Ethereum’s popular ERC20 token standard. The new stablecoin is issued by Circle, a crypto start-up that has gained recognition and backing from financial giants like Goldman Sachs.

Earlier this month, Chinese crypto exchange Huobi announced that it had also added support for USDC, among other stablecoins like the Paxos Standard (PAX), TrueUSD (TUSD), and Gemini Dollar (GUSD). Moreover, the exchange recently announced their own stablecoin HUSD.

For a long time, Tether (USDT) has been the dominant stablecoin in the cryptocurrency market. Following recent controversies, however, it appears as if it is now facing some serious competition from a range of players in the market.

Largely because it has failed to provide conclusive evidence to back up its claim that all Tethers in circulation are backed by US dollar reserves, the stablecoin has been trading at a discount across most crypto exchanges that supports it for most of October.


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Author: Fredrik Vold
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Is Another Short-Squeeze in Bitcoin Looming?

Following the strong run-up in bitcoin prices yesterday, traders may now be eyeing another opportunity for further growth as the short trade is getting unusually crowded for the number one cryptocurrency.

In what appears to be short-term traders positioning themselves for a further sell-off in bitcoin on the Bitfinex exchange, the ratio of short-to-long orders on the exchange reached 1.54 during the Asian trading session Tuesday morning, a level not seen since November last year.

Short-selling essentially involves speculating on lower prices in a market by borrowing an asset that a trader doesn’t currently own in order to sell it in the market. The asset can then be bought back at a lower price later, allowing the short-seller to profit from the difference between the selling price and the buying price.

While a high number of sellers in a market is generally considered a bad sign, it also opens up opportunities when it reaches extreme levels. This is what is known as a short-squeeze, and it is something we have seen repeatedly this year as the short-to-long ratio has hit the high levels we are at now.

If the market starts to move upwards in the near future, many of the short-sellers will exit their short positions by buying back bitcoins in the open market. As the price moves further up, even more short-sellers will get margin calls or hit their pre-set stop-loss levels, forcing them to cover their shorts, and creating a self-reinforcing mechanism that can cause sharp price increases. Whether this will happen again this time, however, still remains unclear.

Another possible explanation is that there is a significant amount of arbitrage going on right now centered on the Bitfinex exchange, following the surge in the bitcoin price yesterday that brought the price on Bitfinex to nearly USD 7,800 at its peak. That was close to USD 1,000 higher than on other exchanges like Coinbase, where bitcoin reached a high of about USD 6,800 yesterday.

An obvious way for traders to take advantage of a situation like that is to short-sell bitcoin on Bitfinex, while buying bitcoin on Coinbase or another exchange. That way, a trader would be profiting as the price gap between the exchanges closes.
The bitcoin price was nearly unchanged across exchanges on Tuesday morning, and still remains significantly higher on Bitfinex than on other exchanges, which many in the community attributes to speculation and fear about the status of the popular stablecoin Tether.


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Author: Fredrik Vold
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A Top-20 Crypto Exchange Is Replacing Tether With a Rival Stablecoin

A top-20 exchange is phasing out an embattled cryptocurrency.

Digifinex has decided to replace tether (USDT), perhaps the best-known “stablecoin” designed to maintain a steady exchange rate with the U.S. dollar, with a rival, TrustToken’s TrueUSD. Based in Singapore, Digifinex handled $131 million in trading volume over the past 24 hours, according to CoinMarketCap, making it the 16th-largest exchange by that measure.

Kiana Shek, Digifinex’s co-founder, told CoinDesk she’d been “looking for ways to get rid of USDT” for months, adding, “I simply don’t believe in tether but I had no choice” but to list it.

Speaking of the decision to adopt TrueUSD, Shek said, “through my research, due diligence, and my communications with the TrustToken team, I have come to appreciate their commitment to industry-leading best practices.”

She mentioned the team’s compliance with the U.S. Financial Crime Enforcement Network’s (FinCEN) regulations and independent verification by an outside auditing firm.
Tether, the company behind USDT, did not give a comment by press time. The firm has been the subject of much negative attention for over a year now, as it has struggled to convince observers that it holds enough dollar reserves to fully back all the USDT in circulation.

Despite allegations that the Tether’s owners and management – which overlaps with that of the cryptocurrency exchange Bitfinex – are printing money, though, USDT’s value remains pegged to $1.00, and many exchanges list multiple trading pairs in USDT terms.
These listings appeal to traders because USDT can be more easily shifted between exchanges than fiat currency. And at the time of writing, tether is the eighth-most valuable cryptocurrency by market capitalization.

It is notable, therefore, that a large exchange has decided to move away from offering tether trading pairs and adopt a rival stablecoin instead. Given the high number of stablecoins that have recently launched or are set to launch soon, the competition Tether faces is likely to increase.

“The risk from tether and the need for a new USD stablecoin is so great,” TrustToken co-founder and COO Stephen Kade told CoinDesk, “that exchanges have started trying to create their own.” An example of this trend is the Gemini exchange’s recent announcement of a dollar-pegged cryptocurrency.

Kade argued that TrueUSD had an advantage over these rivals, however: “TrueUSD is live and exchange-agnostic,” he said.

TrustToken launched TrueUSD in March, the company’s head of marketing and communications Tony Pham told CoinDesk, and plans to launch products linked to the yen, euro and other fiat currencies in the future. And if the goal of wide adoption by exchanges sounds ambitious, TrustToken’s broader push – to tokenize practically any form of asset – is even more so.

TrueUSD trading will become available on Monday at 15:00, Singapore time. Initially, Digifinex will offer TrueUSD trading pairs with bitcoin, ethereum and tether.
Both tether and TrueUSD trading will remain available for a while, said Pham, before tether is dropped from the exchange.


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Author: David Floyd
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Binance Backs $32 Million Funding for Unicorn Founder’s Crypto Stablecoin

Yet another stablecoin is attracting big investors.

Announced Tuesday, the founder behind a $1.4 billion startup unicorn called TMON is revealing he has raised a $32 million seed round to build a stablecoin called Terra. But while a number of startups have deployed stablecoins – cryptocurrencies engineered to track the price of another asset, usually fiat currency – Terra comes with a notable addition: an existing user base.

LIONBIT

Created by Korean entrepreneurs Danial Shin, who founded and chairs TMON, one of the top e-commerce websites in South Korea, the Terra project is launching with a significant number of partners that already reach 40 million customers. Those partners, who will together form the Terra Alliance, a group of e-commerce sites that are interested in incorporating the stablecoin into their business, include Woowa Brothers, Qoo10, Carousell, Pomelo and TIKI.

According to a spokesperson for the project, those companies, combined, take in $25 billion in sales.

“We’ve banded together all the e-commerce platforms in Asia that are not called Alibaba or Amazon to push Terra into the hands of many many people,” Shin told CoinDesk.

It’s no wonder that the round includes quite a few notable crypto investors, including Polychain Capital, FBG Capital, Hashed, 1kx, Kenetic Capital, Arrington XRP, Binance and others who were not disclosed.

“We are pleased to support Terra, which sets itself apart from most other blockchain projects with its established and immediate go-to-market strategy,” said Polychain’s Karthik Raju in a statement.

Echoing that, Ella Zhang, head of Binance Labs, said in a statement:

“While we see many stablecoins coming out, Terra’s journey is especially meaningful as they are designing one of the few price-stable protocols with existing, working and strong go-to-market strategy and usage.”

That use, according to Shin, is in acting as an economical digital payment system, compared to credit cards.

He told CoinDesk, that a significant portion of TMON’s annual losses take the form of credit card fees. And he’s sure other retailers experience the same.

That said, if companies like his can lower transaction fees dramatically, he believes they stand a better chance against the industry giants.

For the new alliance of companies, “the commitment really is that they will work together on a more efficient form of payment, obviously using blockchain technology,” he continued.

TIP

A two-token system

To do that, the Terra protocol uses two tokens: terra and luna.

Investors in the seed round bought tokens from a pool of 400 million luna tokens (a fixed supply of one billion luna tokens will be created) set aside for them.

These luna tokens function as collateral on the network. Their sale will supply an initial reserve that will help stabilize the price versus fiat, much as Tether does now. The other token, terra, will act as the day-to-day payment method that consumers will use when the protocol goes live. It will be emitted as needed based on demand.

Then every time a transaction happens on the network, a tiny transaction fee will be paid to holders of Luna.

Shin told CoinDesk:

“Luna is essentially a decentralized equity akin to Visa and Mastercard.”

He continued: “What we’ve learned watching Visa and Mastercard stock prices every year, it’s very smooth.”

Much like other stablecoin projects, oracles on the network will monitor supply and demand. As terra’s use grows, it will algorithmically issue new tokens.

The advantage to e-commerce consumers and merchants will be that these new issuances will be used to provide discounts to people who use the crypto token. So, for example, if the protocol has issued a new lot of terra, merchants might be able to give consumers a 10 percent discount on purchases made with the token – that is until the new supply runs out.

“As we integrate with more e-commerce partners, we are able to distribute that money back to e-commerce companies and their consumers in the form of kickbacks and discounts,” Shin said.

In this way, the project seems focused on one of bitcoin’s early touted use cases, as a cheaper digital payments rail as compared to the incumbents.

What Terra still needs, though, is a host blockchain – a big question for many projects today. The protocol will run on top of one of the existing projects; Shin said either ethereum, EOS, Orbs, messaging giant Kakao’s Ground X or the forthcoming project from Upbit, one of Korea’s exchanges.

But Shin doesn’t seem phased by that, telling CoinDesk that even though the focus will first be on the Asian market, that’s just the start of the project’s aspirations.

“We thought deploying the design in the U.S. where crypto adoption is very low, makes very little sense,” Shin said, adding: “I think the ambition is global.”


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Brady Dale
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Peoples Token

Bitcoin Price Eyes Comeback as 250 Million New Tethers Enter Circulation

Cryptocurrency start up Tether issued $250 million in new tokens on Monday, sparking speculation that a bitcoin price rally could be inbound



Blockchain data indicates that Tether, the creator of cryptocurrency “stablecoin” USDT (colloquially called tether), issued 250 million new tokens this morning, June 25.

USDT, which is pegged to USD at a 1-to-1 ratio, serves as a proxy for physical dollars on many cryptocurrency exchanges, owing to the fact that many trading platforms have difficulty obtaining the banking relationships necessary to hold fiat currency on behalf of customers. Over the past 24 hours, tether’s $4.2 billion in trading volume was second-highest among all cryptocurrencies, ranking behind only bitcoin.

That Tether is issuing new tokens is an indication that new capital is flowing into the cryptocurrency markets, since — at least according to the company — tokens are created when individuals or organizations deposit physical dollars into Tether’s reserve bank accounts.

Consequently, the release of these tokens could be a bullish indicator for the bitcoin price (and by extension the wider cryptocurrency market), considering, of course, that the owner could hold them for an indefinite period of time before trading them.

Monday’s creation of 250 million new tokens marked the first significant tether issuance since May 18, when Tether issued $250 million in USDT. The bitcoin price rose in the days following this event, from $8,100 on May 18 to $8,500 on May 21. However, that rally proved to be short-lived, and the bitcoin price shed more than $2,300 in the weeks that have followed.

Questions have long swirled about Tether’s solvency, particularly since the firm has never released an independent audit of its balance sheet.

However, last week, legal firm Freeh, Sporkin & Sullivan LLP (FSS) released a report indicating that USDT was fully-backed by physical dollars stored in Tether bank accounts, as of June 1. While not a full audit, the report was an important step toward rebutting allegations that the company has operated a fractional reserve, using unbacked tokens to manipulate the bitcoin price at key points during market swings.

The token currently has a circulating market cap of more than $2.6 billion, making it the 11th-largest cryptocurrency. According to Tether’s “Transparency” page, the firm is holding more than $3 billion in its reserve bank accounts, indicating that it could issue approximately $400 million in new tokens without exceeding its assets.


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author Josiah Wilmoth
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