Tether’s circulating supply expands after nearly three months of reductions, rally on the horizon?

  • The renewed expansion hints at a slight crypto market recovery.
  • Residents in nations with high inflation levels hold USD-pegged stablecoins to hedge against the inflation in their countries.

After almost three months of decline, Tether’s USDT supply is starting to rise again. This rise is an indication that the crypto market is gradually beginning to recover. Coinmarketcap data shows that the first mint in the nearly three months happened last Friday (July 29, 2022).

Also, three more mints have occurred since then, with the last one on Tuesday (August 2, 2022). While these USDT injections seem small, it has caused a 0.7 percent rise in Tether’s market cap. That percentage translates to a little under a $500 million increase.

Tether’s latest transparency data shows that 66.3 billion USDT is currently in circulation. Thus, we can estimate that Tether’s stablecoin owns about 43 percent of the total stablecoin market share. Tether supply reached 83 billion USDT in early May, setting a new record then. However, the company had to reduce the circulating supply due to a number of factors.

These factors include the crash of the Terra network, vast volumes of redemptions, and the consequent crypto contagion. Hence, it was no surprise that Tether’s circulating supply dropped by 21 percent to 65.8 billion last month. However, Tether’s main rival, Circle, took advantage of that reduction to increase the circulating supply of its stablecoin (USDC) and catch up with USDT’s supply.

Related: New Arcane report predicts when USDC will overthrow USDT

The market cap of Circle’s USDC is now $54.5 billion, owning 36 percent of the total stablecoin market share. As previously reported in various media, there was a period last month when USDC’s volume on Ethereum was briefly ahead of USDT’s volume on the network. During the weekend, Binance CEO, CZ, stated that there is a lot of fiat waiting to re-enter the crypto market once the conditions are right.

He added that people wouldn’t be holding stablecoins if they wanted to get out of crypto. CZ’s comments were on the back of multiple data showing that three of the top 10 cryptos are stablecoins. Currently, stablecoins dominate 13.6 percent of the total crypto market cap. It is gradually closing in on its all-time high of 16.4 percent, set in June 2022.

Stablecoins and high global inflation levels

Many retail traders have stopped investing or speculating about the crypto markets as the cost of living keeps rising. Rising inflation levels on a global scale have been causing a rise in living costs. Hence, residents in nations with high inflation levels like Argentina have resorted to holding USD-pegged stablecoins to hedge against their fiat currency.

Tether highlighted the importance of owning stablecoins when it stated that holders of USDT in places like Argentina could access a truly global market. Hence, they can become free from the effects of inflation on their local currencies.

The statement added that another advantage of holding USDT is that government laws don’t affect their holdings. Hence, the government can’t seize their funds which they can do if the funds were in local bank accounts.