Investors are fleeing Tether (USDT), according to data from the chain. As a result, the stablecoin giant has lost significant market share amid a series of market corrections.

Tether Losing Market Share

Tether currently sits at a market cap of $68 billion, the lowest since October of last year, down from the recently set all-time high of $83 billion. Since then, the stablecoin has experienced a cascade of repeated drops. According to data from CoinGecko, it has lost around $4 billion since June 14 alone.

The collapse of TerraUST pushed market players to seek refuge in other digital assets that maintain a one-to-one parity with the USD. As a result, the resulting market contagion sent cryptocurrencies and stablecoins reeling, during which USDT briefly lost its peg to the dollar as it fell to 95 cents.

While it quickly managed to re-peg, the death spiral caused many investors to abandon the stablecoin giant for its rival: USDC, a top contender. Upon further evaluation, it was found that unlike USDT’s falling market cap, Circle’s flagship stablecoin has been on an upward trajectory.

After peaking in the first week of March, USDC’s market capitalization quickly rebounded in mid-May. As previously reported, it even became the stablecoin of choice on the Ethereum blockchain.

During the same time, Binance USD (BUSD) also noted a minor but relevant bounce. With the demise of TerraUSD, the three largest stablecoins (Tether, USD Coin, and Binance USD) have managed to maintain their positions in the top ten leaderboard.

The reduction in Tether’s market capitalization comes days after it refuted rumors that the stablecoin is largely backed by Chinese and Asian commercial paper. Regarding recent events affecting crypto lending platform Celsius, the issuer of the stablecoin stated:

“The Celsius position has been liquidated with no loss to Tether. Tether’s lending activity with Celsius (as with any other borrower) has always been overcollateralized. Tether currently has zero exposure to Celsius, apart from a small investment made with Tether’s capital in the company. Tether is aware of other rumors being spread suggesting that it has credit exposure to Three Arrows Capital; again, this is categorically false.”

Separately, Tether CTO Paolo Ardoino described an attack against the company’s servers, but said it was unsuccessful.

stablecoin economy

While other dollar-pegged tokens may be eating into Tether’s stake, for the first time ever, the total stablecoin supply as a whole dropped sharply in Q2 2022 (excluding UST). CoinMetrics head of research and development Lucas Nuzzi revealed that stablecoin swaps increased tremendously due to short-term liquidity and insolvency concerns.

Of all the centralized issuers, Tether witnessed the largest number of bailouts, removing roughly $7 billion from its supply in the last month, as investors sought to withdraw from the market and avoid further damage.

However, the rapid fall in prices of all non-stablecoin crypto assets means that stablecoins have risen in terms of market capitalization and placement. Recent data shows that there are four such digital assets in the top 10 cryptocurrencies, with the fifth also close to entering.

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