Tether's USDT: The Titan of Stablecoins in the Crypto Arena?

2024-06-05, 07:07

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![](https://gimg2.gateimg.com/image/article/1692587449analysis.jpeg)
## [TL; DR]
<a href="/zh-tw/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> USDT is the dominant stablecoin with a market share of about 70.3%.

stablecoins facilitate borderless crypto transactions and other DeFi functions like lending and borrowing.

Many stablecoin users prefer to use the Tron blockchain network when sending and receiving USDT.

## Introduction 
stablecoins are one of the most important types of cryptocurrency due to their ability to maintain their values during periods of market volatility. Even though there are many stablecoins Tether USDT remains the leader and is likely to maintain its market dominance for a long period. This analysis focuses on [what stablecoins are and how essential](https://www.gate.io/learn/articles/stablecoins-are-helping-create-a-buyer-of-second-to-last-resort-for-us-treasury/3095 "what stablecoins are and how essential") they are to the entire crypto ecosystem. We will put more emphasis on Tether USDT, the leading stablecoin on the market.

## Stablecoins: The Need for Stability
As said, stablecoins have [an important role in the crypto space](https://www.gate.io/learn/articles/what-is-stablecoin/40 "an important role in the crypto space") as they are a store of value since they are less affected by market volatility than other cryptocurrencies. By nature, stablecoins are designed to maintain certain values based on the assets they are pegged against. While the values of some stablecoins are pegged against certain fiat currencies like the US dollar, pound or Euro the others track the values of precious assets such as gold.

Either way, every stablecoin issuer should maintain the right amount of reserves. For example [Tether Labs, the issuer of USDT](https://www.gate.io/learn/articles/what-is-tether-usdt/205 "Tether Labs, the issuer of USDT"), keeps US dollar reserves. Normally, it keeps the United States dollar reserves with a bank which helps to maintain the liquidity of the stablecoin.

stablecoins are also important in the cryptocurrency market as they are paired with other digital assets for trading purposes. As an instance, Tether USDT is paired with almost all cryptocurrencies that are on centralized  exchanges. stablecoins are also used in different DeFi protocols. In addition, they are used for international financial remittances.

Read also: [LST-Backed Stablecoins: A New Frontier in DeFi ](https://www.gate.io/learn/articles/lst-backed-stablecoins-a-new-frontier-in-defi-innovation-and-opportunity/2200 "LST-Backed Stablecoins: A New Frontier in DeFi ")

## The Surge of Stablecoins: A Look into the Meteoric Rise in Stablecoin Market Capitalization Since 2020
Over the past year the stablecoin market grew significantly due to the rise of their demand. For example, the stablecoin market valuation increased from $122 billion in October 2023 to $157 billion by April this year. Tether USDT, with over 70% market dominance, has been [one of the fastest growing stablecoin](https://www.gate.io/uk/blog_detail/4009/surpassing-tether-as-the-largest-stablecoin-everything-you-need-to-know-about-what-ethena-ena-is "one of the fastest growing stablecoin"). The USDT market dominance is a result of its adoption in various DeFi platforms and crypto exchanges.

Currently, the stablecoins have a total market capitalization of over $161 billion, signalling the substantial growth in the sector. As of 29 May Tether USDT attained a market cap of $111 billion. The other stablecoins whose market capitalization grew significantly during the same period are <a href="/zh-tw/price/trueusd-tusd" target="_blank" class="blog_inner_link">TrueUSD</a>, USDC, [Ethena](https://www.gate.io/learn/articles/whats-ethena-a-stablecoin-perspective/3004 "Ethena") and <a href="/zh-tw/price/usdd-usdd" target="_blank" class="blog_inner_link">USDD</a>. The following graph shows the market capitalization of [the top 10 stablecoins](https://www.gate.io/price/view/stablecoins "the top 10 stablecoins").
![](https://gimg2.gateimg.com/image/article/17175709221.jpg)
Top Ten stablecoins by Market Capitalization: CCData

The graph on the left shows the top 4 stablecoins while the one on the right indicates the other 6.  On the other hand, the next graph shows the growth trajectory of stablecoins between 2016 and 2022.
 ![](https://gimg2.gateimg.com/image/article/17175709432.jpg)
Growth of 10 stablecoins between 2016 and 2022 - Statista

As <a href="/zh-tw/price/the-graph-grt" target="_blank" class="blog_inner_link">The Graph</a> indicates, the top blue line shows the total market capitalization of the cited stablecoins. Basically, the growth in the stablecoin market cap during that time was gentler than now due the low demand that existed during that period. The next graph shows the growth of the entire stablecoin market between 2018 and 2024. 
![](https://gimg2.gateimg.com/image/article/17175709613.jpg)
stablecoins Market Cap – IntoTheBlock

As the graph indicates, the stablecoin market grew remarkably since 2021 as a result of mass adoption for international remittances. For example, there has been an increase in USDT transactions globally. Another factor leading to the rise in demand for stablecoins is their increasing role in the DeFi ecosystem.

In an [interview with BeInCrypto](https://beincrypto.com/exploring-tether-usdt-key-position/ "interview with BeInCrypto"), Vincent Maliepaard, the Marketing Director at IntoTheBlock said,  “While some of this growth is due to the rising interest in cryptocurrencies, it is primarily driven by the growing importance of DeFi and the crucial role stablecoins play in DeFi primitives like lending protocols and automated market makers (AMMs).”

Read also: [How Has Ethereum Emerged as a Leader in Stablecoin](https://www.gate.io/learn/articles/ethereum-has-emerged-as-a-leader-in-stablecoin-development/2895 "How Has Ethereum Emerged as a Leader in Stablecoin")

## About Tether USDT, the Market Leader
Irrespective of the high competition in the stablecoin market USDT, Tether is the leader. Launched in 2014, the USDT stablecoin is the only cryptocurrency that rivals <a href="/zh-tw/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> in terms of trading volumes. On the contrary, USDC, the second largest stablecoin has a mere market dominance of 21%. Interestingly, there is no sign that the USDT Tether market growth is slowing. The next graph shows the increase in Tether USDT market capitalization since 2015.
![](https://gimg2.gateimg.com/image/article/17175710144.jpg)
Tether USDT Market Capitalization Growth - Statista

As the graph shows, Tether USDT has a current market capitalization of $111 billion. What is also important to note is that the number of cross border cryptocurrency transactions is also rising astronomically. Due to its dominance people can [buy Tether at various decentralized and centralized exchanges](https://www.gate.io/how-to-buy/tether-usdt "buy Tether at various decentralized and centralized exchanges") like Binance, Coinbase and Gate.io. For example, at Gate.io people can buy USDT using various methods including wire transfer, credit cards and P2P trading.

## USDT's Integral Role in the Defi Ecosystem
There is no doubt that USDT is an integral part of the DeFi ecosystem as it supports various functions that include liquidity provision, lending and borrowing.

USDT as Liquidity Lighthouse: Tether USDT provides liquidity on various exchanges and DeFi platforms. In most cases, USDT has the highest trading volumes on DeFi platforms and crypto exchanges since it is paired against many crypto assets.

Also, DeFi and stablecoins have close connections. This is because many DeFi protocols use USDT for various transactions as well as lending and borrowing as it enables the users to conduct transactions without exposure to price volatility.

Cross-Border Efficiency: Tether USDT facilitates swift, convenient and cost effective cross border cryptocurrency transactions. Due to its ability to maintain a stable value it is the best alternative to fiat currencies, especially the United States dollar. In fact, Tether USDT’s parity against the US dollar makes it the most preferred stablecoin around the world. Likewise, the fact that it is integrated with many payment systems makes it a cryptocurrency of choice.

Providing Stability: As hinted above, Tether USDT stability makes it a good volatility shield during tumultuous crypto market periods as it facilitates trade without direct exposure to fiat currencies. As such, it is a fundamental tool for hedging against volatile digital assets. In addition, it acts as a reliable bridge between digital finance and traditional finance.

## USDT's Dominance across Chains: From TRON's Transaction Volume Supremacy to Ethereum's Role in High-Value Transfers
One thing that makes Tether USDT stablecoin unique is its presence on several blockchain networks that include <a href="/zh-tw/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>, <a href="/zh-tw/price/polygon-matic" target="_blank" class="blog_inner_link">Polygon</a> and Tron. However, an emerging trend is that certain USDT transactions or activities are dominant on specific networks. Let’s look at a few of these trends.

<a href="/zh-tw/price/tron-trx" target="_blank" class="blog_inner_link">TRON</a> Dominates USDT Transactions: The Tron network leads in terms of transaction volume, with a 78% dominance in this regard. The main reason for this is that the Tron network has very low transaction costs. Also, the network is available on many major centralized exchanges like Gate.io, Binance and Coinbase. In this respect, Polygon is the second most dominant blockchain network as the next graph shows.
![](https://gimg2.gateimg.com/image/article/17175711695.jpg)
Source: x.com

As the graph indicates, the other leading networks in this regard are Ethereum, Arbitrum, <a href="/zh-tw/price/optimism-op" target="_blank" class="blog_inner_link">Optimism</a> and <a href="/zh-tw/price/avalanche-avax" target="_blank" class="blog_inner_link">Avalanche</a>.

Transaction Volume Comparison: The Ethereum blockchain network often records the highest transaction volume. The reason is that the network facilitates high value USDT transactions. Although the other networks like Optimism, Avalanche and Polygon have large numbers of transactions their values are normally lower than Ethereum’s.

Holding vs. Transacting: Ethereum is the blockchain with the longest USDT holding period compared to the other networks. On-chain data shows that on average users on Ethereum network keep Tether USDT for around 228 days, which is about three times longer than what the holders on Optimism do.

These insights show that USDT on Tron and Ethereum is mainly used to mitigate against crypto volatility. On the other hand, most USDT users rely on Optimism and Arbitrum for transactions, especially in DeFi-related applications.

## The Inexorable Rise of Tether: USDT's Integral Role in Blockchain's Future
With the look of things, USDT will continue to contribute much to the general crypto and DeFi markets due to its potential to anchor digital asset stability. Nonetheless, the continued growth of the crypto industry means that the stablecoin will maintain its dominant role in supporting international remittances, propping DeFi liquidity as well as hedging against market volatility.

## Conclusion 
The stablecoin market has been growing since 2015 due to the expansion of the DeFi sector and a rise in international crypto remittances. Tether USDT is the largest stablecoin with over 70% market dominance and existing on several blockchains including Optimism, Tron, Ethereum, Avalanche and Polygon. One of USDT’s main functions is the provision of liquidity on centralized exchanges and DeFi platforms.

<div class="blog-details-info">
<div>Author:**Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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