NYDIG: Tether supply growth is ‘positive’ for crypto

The supply of leading stablecoin issuer Tether has regained recent losses to reach two-month highs as speculation of this year’s rally drives USDT adoption further.

The USDT market cap witnessed a 3.8% uptick from the November 27th low of $65.3 billion to $67.8 billion on Sunday — its highest point since the FTX collapse pushed the market to unfathomable levels.

According to data from tech and financial firm NYDIG, over the last 30 days, Tether has facilitated over $980 billion in exchange trading volumes, compared to BUSD’s $323 billion and USDC’s $135 billion.

The firm points to a boost in the stablecoin’s supply as evidence of increased capital flows into the crypto market, and a positive sign based on historical precedent.

In a Friday newsletter, the firm said: “We think the continued growth of Tether supply is a positive indicator for the continued price rally.”

The supply uptick echoes the 2019 market recovery, which coincided with a robust rally for bitcoin. Back then, prices leaped from $3,250 to over $13,000 before correcting in the second half of the year.

The same was true of the lead-up to the sector’s latest bull run, where the stablecoin supply soared 100% from August 2020 until January 2021, which happened alongside a 130% surge in BTC’s price.

Still, not all are convinced of the correlation between the USDT supply and favourable market conditions.

“We have definitely seen an elevated interest in digital asset accumulation as well as transaction flows in stablecoins recently,”, Treasurer at Australian trading firm Zerocap, William Fong, told reporters.

“However, we cannot be sure if it’s directly related to USDT supply movement or is really simply a risk adjustment on macroeconomic events.”

According to Fong, more probable catalysts are the central bank policy meetings this week, which include a possible reduction in the tightening rate from the US Federal Reserve.

Notably, the industry’s third-largest stablecoin hasn’t been able to maintain the pace. Binance’s stablecoin supply fell 27% from $21.8 billion on December 13 to $15.7 billion. Pressure on the stablecoin increased due to the outflows from the token’s native exchange in mid-December and traders exiting the platform.

Overall, a drop in the confidence of the exchange’s brand following Mazer’s decision to stop conducting audits exacerbated the stablecoin’s shaky footing in the fourth quarter.

USDC also decreased but faired better, down about 4.6% from $45.1 billion to 43 billion over the same period.

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