The stablecoin Tether (USDT) pegged to the U.S. dollar has been on a tear in many ways in 2020 but most prominently in trading volume. As of 16th October, Tether’s 24 hours’ trading volume has grown to the astronomical $43.3 billion, according to CoinMarketCap. That is over three times more than Ethereum’s daily trading volume on the same day, which was $13.7 billion.
The huge rise of the Tether coin has happened because Tether has largely substituted the fiat U.S. dollar on all notable exchanges. While back in 2017 when Tether was launched, it only had a tiny fraction of daily trading volume on the cryptocurrency market. Meanwhile, in 2020 its share of the cumulative cryptocurrency market’s trading volume has topped 80%. The accessibility of Tether has risen largely over the course of the last three years, and USDT to USD conversion has become much easier, which has positively affected Tether’s presence in the cryptocurrency market.
The difference in USD and USDT volumes will be even more demonstrative if we look at Ethereum’s trading pairs across exchanges. On CoinMarketCap among the top 10 trading pairs for Ethereum by rank, there is only one ETH/USD pair at Coinbase Pro with $35,696,908 worth of daily trading volume, while the first trading pair by rank is ETH/USDT at Binance with $254,969,232 worth of daily trading volume, and the fifth is ETH/USDT at Huobi Global with $301,111,421 worth of daily trading volume.
As for market capitalization, Ethereum is well ahead of Tether: $41.7 billion (ETH) against $15.8 billion (USDT). However, Tether’s capitalization is growing much faster than Ethereum’s: at the beginning of 2020 Tether’s capitalization was $4.116 billion and has reached $15.785 billion by 16th October, having grown by 284%. Moreover, the Ethereum value directly affects its market cap, and it has fallen considerably in September even despite the all-time high average gas fee registered on the 2nd September caused by the high congestion on the Ethereum blockchain created by the DeFi boom. However, the peak congestion levels on Ethereum’s blockchain did not have any positive effect on its market valuation.
Bearing in mind that Tether’s capitalization only depends on the cryptocurrency market’s trading volume, and Ethereum’s capitalization is directly affected by Ether’s price, it is more than likely that at the given rate of Tether’s market cap growth its capitalization will grow larger than that of Ethereum by 2022.