It’s sometimes hard to forget that Tether still dominates this space regardless of the ‘non-event’ over the last 2 weeks as the stablecoin recovered in price from its 90 cents lows, to the 99 cents it trades at today.
According to data from Stablecoinswar.com, Tether (USDT) still has a market cap close to $2 billion. That’s 11 times bigger than its closest competitor True USD (TUST), or 22 times bigger than the newly hyped Coinbase/Circle partnership USDC.
Another commonly forgotten statistic relates to the amount of daily volume done by Tether. Most days we see close to 100% of its market cap traded on exchanges whereas most other stablecoins trade between 10%-20% of the respective market caps.
$500 million gets destroyed
It’s clear that the Tether corporations have been taking advantage of the price drop to earn themselves a guaranteed arbitrage profit (Assuming they have 1:1 Tether for each USD). Just a few days ago they tweeted out proof that they had “destroyed 500M USDT from the Tether treasury wallet”.
— Tether (@Tether_to) October 24, 2018
If you make some assumptions on the average price that the Tether corporation where buying USDT (for under one dollar), in the last 2 weeks you could expect Tether to have made approximately $10-20 million dollars in risk-free profits.
Was this the innovation we were all talking about?
Not everyone has been so impressed by the recent wave of announcements in the stablecoin space. Self-proclaimed crypto “thought leader/billionaire” Richard Heart sent a tweet out proclaiming stablecoins were not: “trustless, anonymous, censorship-resistant, open source, peer to peer, decentralized or smart”
The only ‘smart’ implementation I have seen, has been the Dai stablecoin. The Dai maintains its $1 peg with a Collateralized Debt Positions (CDP). In order to mint Dai, network users must lock up collateral in a CDP.
A CDP must be over-collateralised by at least 1.5x the value of Dai generated. The fact that this CDP is publicly auditable on the Ethereum blockchain helps to maintain stability and Trust in the network.
Apart from this, most of the innovation from stable coins seems to be related to how quickly entities can set up and maintain banking relationships on their fiat holdings.
Part of Coinbase’s rationale for moving into stablecoins was to enable the token to flow in and out of the burgeoning dApp ecosystem. Other upcoming use cases also include the use of a stable fiat token to enable blockchain style securities (Priced in fiat).
Unlike through a broker, securities on the blockchain can truly be a bearer asset, freely tradable and supply transparent.
Tether may have a dominant position amongst exchanges with trading volume today, but the battle to be the top stable peg of choice isn’t quite over just yet.