​CryptoQuant: USDT remains stable amid ongoing market turmoil

What’s new? Experts at CryptoQuant analyzed blockchain data on the Tether (USDT) stablecoin following criticism from The Wall Street Journal and Bloomberg that questioned the stability of the coin. CryptoQuant data showed that the price of USDT remains pegged at $1, with the volatility of the asset significantly decreasing over time. In addition, USDT remains stable even as the volume of redemptions increases due to ongoing market turmoil. Part of USDT’s stability with the high volume of redemptions is due to the fact that this figure is lower than that of other stablecoins (as a % of total supply).

CryptoQuant’s analysis

Report details. The price of USDT on the Ethereum network became less volatile as the asset’s market capitalization grew, meaning it deviated less frequently from $1, experts noted. In 2018-2019, the value of the stablecoin fluctuated between $0,95 and $1,05 as a result of market shocks, such as the 2018 market peak or the spread of misleading information leading to falling quotes (FUD). For example, in 2022, the average USDT price fell to a daily low of $0,996 in May when the Terra blockchain ecosystem that produced the UST stablecoin collapsed, and rose to $1,006 in early November when the FTX crypto exchange went bankrupt.

The volume of redeemed supply tests Tether’s ability to meet its token-to-fiat exchange commitments. During downturns, USDT holders typically want to exit the crypto market by first selling their assets for stablecoins such as Tether and then exchanging them for fiat currency.

The amount of USDT redeemed for US dollars has increased over time, including as the market capitalization of the asset has grown. However, the increase coincided with the USDT price becoming less volatile. On-chain data shows that “the market so far believes in Tether's ability to exchange its token for actual US dollars, as the price of USDT has remained pegged to $1 even in episodes of market turmoil,” the report says.

Experts noted that USDT has one of the lowest redemptions volumes relative to total supply. The relatively low redemption ratio may be one of the reasons why USDT can handle a high volume of operations without much pressure on its market price.

In terms of network activity, blockchain data shows that the USDT price became less volatile and has maintained its peg to the US dollar even as the number of users and transactions has increased. On December 8, for example, daily active addresses reached an all-time high of 248 027, while market capitalization on the Ethereum network fell to its lowest level since May 2021. Daily token transfers reached an all-time high in early May 2022, when Terra collapsed.

According to QryptoQuant, the total supply of USDT in the TRON network is higher than in Ethereum. The former had a figure of $37 billion, the latter $32 billion. In 2021, the circulating supply of USDT in TRON grew faster than in Ethereum, thanks in part to lower transaction fees. The trend continued in 2022, even after Ethereum’s transition to the Proof-Of-Stake (PoS) consensus algorithm resulted in lower transaction fees.

It is noted that no USDT was burned on the TRON network at the time of the FTX crash. However, during the sell-off associated with the Terra collapse, the amount of USDT burned on the TRON network was $4 billion compared to $3 billion on Ethereum.

In December, it became known that Tether would stop issuing loans secured by USDT in 2023. The decision was taken against the background of publications in the media about the company’s unsecured loans.