Tether (USDT) Returns To Parity As Circulating Supply Continues To Drop

Tether (USDT), the stablecoin that is pegged on the US Dollar caused panic in the crypto market when its price plummeted at the beginning of mid-October.

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Tether (USDT), the stablecoin that is pegged on the US Dollar caused panic in the crypto market when its price plummeted at the beginning of mid-October.

Tether (USDT) Returns To Parity As Circulating Supply Continues To DropHowever, from trading as low as $0.92 to the dollar, Tether has steadily recouped its value to hit dollar parity. USDT, that is pegged to the USD at 1:1 hit the $1.00 mark on Monday, October 29.

It might have put a short-term end to the USDT/USD decline that first popped up at the beginning of the month.

Nevertheless, it remains to be seen if the much-maligned crypto will maintain at that level, with stiffening competition emerging from other USD-backed coins like TrueUSD and Gemini Dollar. It currently trades at just below at $0.995

USDT/USD in October

Tether (USDT) experienced a marked decline that began as the usual less than a cent discount. However, that rot increased further down the month and hit a high on October 15.

The stablecoin’s performance got worse, and the USDT/USD peg flipped, plunging its price to an 18-month low last witnessed in April 2017. Other than hitting a low of $0.91 on most major exchanges, the coin nosedived to about $0.85 on U.S crypto exchange Kraken.

Tether (USDT) Returns To Parity As Circulating Supply Continues To DropControversy continues to linger around whether Tether Limited, the coin’s issuer, has an equal amount of actual USD in reserve. However, following the price of thousands of traders redeemed millions worth of USDT.

The fact that Tether was able to settle all these millions of dollars has helped bolster its claim that it holds an equal amount of fiat dollars.

That has helped boost the coin’s price, which has gradually gained to reach dollar parity levels.

With many more investors choosing to redeem their funds in the last few weeks, tether’s circulating supply and market capitalization have both plummeted in October.

For instance, USDT supply is down to about 1.9 billion tokens. In contrast, that supply had stood at about 2.8 billion units in the first week of October.

Market supply for USDT has therefore diminished by over a third in the month. Large transactions are responsible for this reduction, with two particular transactions completed on Thursday last week decreasing tether’s circulating supply by another 100 million tokens.

On the whole, USDT holders could have redeemed up to $890 million worth of the stablecoin in the month of October alone. The result has been an increase in the non-circulating USDT to a point Tether Limited decided to permanently destroy 500 million tokens.

Battling competition

Whether tether manages to retain its dominance in the USD-backed crypto ecosystem is an interesting story to watch out for in the near future.

As at now, USDT needs to battle intensifying competition that has seen no less than four price-stable coins released.

It may prove hard for Tether to command new capital inflows given its long-standing dominance is now threatened by coins like  TrueUSD(TUSD), USD Coin (USDC), Gemini Dollar (GUSD) and Paxos Standard Token (PAX).

Among the top five stablecoins, only Tether (-0.14%) is trading below the dollar peg in the last 24 hours. Tether, however, has one big advantage over its competitors; it’s the most liquid of all stablecoins, dominating that market by about 98 percent in daily trading volume.

At the moment, daily turnover for USDT is over $2.3billion and has seen over $220 million and $140 million exchanged under the pair BTC/USDT on Coinbene and OKEx respectively.

In comparison, the other coins have a daily turnover of $34 million for TrueUSD, $4.8 million for GUSD, $2.8 million for USDC, and $23 million for PAX.

Even then, inflows for USDT might remain low since its likely most people will find it unreasonable to pay $1.00 for a token that trades even less.

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