Despite Looming Risks, Tether Wins Stablecoin War‍

Over the previous two weeks, Stablecoin's value has increased by more over $5 billion.

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In the struggle for the stablecoin market, Tether is extending its lead. Its expansion is not without controversy, though.

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Tether's value has climbed by more than $5 billion in the last two weeks to over $79 billion, according to data from CoinMarketCap, making it the largest stablecoin in the world by market cap.

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The development occurs at a time when its top rivals are struggling. Run by Circle Internet Finance Ltd., Dollar Coin's value has decreased from $5 billion to around $34 billion. After Circle revealed that it had $3.3 billion of the stablecoin's reserves invested in the defunct Silicon Valley Bank, the coin's 1-to-1 peg to the dollar was broken. 

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In the meanwhile, as New York officials forbade the new U.S. issuing of the stablecoin, the market valuation of Binance USD, the third-largest stablecoin in the world, has nearly halved from its record high.

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Tether is "strong and trustworthy for its user base, mainly in the developing markets and in poor countries," according to a spokesman.

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It's crucial that the stablecoin business stay diversified and competitive, she continued, therefore we hope that our rivals will increase their risk mitigation and dependability.

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Several businesses and dealers have come to rely more heavily on stablecoins as a means of transferring funds as U.S. officials have intensified their efforts against cryptocurrency firms and cut off their communication with financial institutions.

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According to research company CryptoCompare, stablecoin market trading volumes reached $51.9 billion on March 14. This is the greatest one-day total since the demise of cryptocurrency exchange FTX in November. Almost $42 billion of that amount was tethered. Tether has been able to maintain a tiny price premium over its $1 peg on centralized cryptocurrency exchanges like Binance because to increased demand.

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Ironically, some market participants have found Tether's success to be. Regulators and investors have criticized the corporation over the years for its lack of transparency. It has not disclosed every one of its banking partners, despite having at least since 2017 promised an audit.

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Bobby Zagotta, CEO of cryptocurrency exchange Bitstamp USA, observed that Tether's lack of openness has currently benefited it more than Circle's transparency. Yet, in the long run, I and the majority of investors would prefer openness.

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The recent development of tether, according to some observers, is risky. According to CoinGecko data, the majority of the 5 billion tether tokens generated since March 10 were released on the Tron network. Regulators are looking closely at Tron, previously the busiest network for exchanging tether.

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The blockchain's creator Justin Sun and Tron Foundation Limited were sued on Wednesday by the Securities and Exchange Commission on grounds that they sold unregistered crypto tokens and manipulated the trading volume of TRX, Tron's native token, in violation of the securities laws. Last Monday, Mr. Sun tweeted that the SEC's complaint was unfounded.

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According to the company's website, Tether has released more than 44 billion, or around 56%, of the eponymous coin on the Tron blockchain, which some analysts and investors claim strongly ties tether's fate to that of Tron.

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To reduce the dangers for tether on the blockchain, Tron could, of course, reach a settlement with the SEC.

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The Tron blockchain is particularly well-liked for payments and savings in high-inflation nations where demand for US dollars is high, according to Kyle Waters, senior research associate at cryptocurrency research firm CoinMetrics. Tether, for instance, is a well-liked cryptocurrency in Turkey among Turks trying to escape the Turkish lira.

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Yet, some investors are reluctant to rely solely on a single, significant stablecoin that operations outside of the United States.

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As a rule, financial systems shouldn't have a single failure point, according to David Wells, CEO of cryptocurrency trading site Enclave Markets. Hence, whether it's liquidity concentration in a single trading platform or stablecoin concentration in a single issuer, it puts the industry at risk for potential key infrastructure risk.

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Investors are also alarmed by the fact that tether's ascendance is occurring at the same time as the total stablecoin market is contracting. According to CryptoCompare, the total current valuation of all stablecoins has decreased for a continuous 12 months and was at $133 billion as of March 20, the lowest number since September 2021. In the meantime, on the strength of the banking crisis, bitcoin and ether, which are frequently thought of as riskier than stablecoins, have risen this month.

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Chief Investment Officer of cryptocurrency asset manager Arca Jeff Dorman claimed that the turmoil in the banking industry, which has caused investors to reevaluate what constitutes secure assets, is a contributing factor in the decrease.

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According to Mr. Dorman, "it's not shocking that as a whole virtual currency asset management is declining as ether and bitcoin are rallying because the safety net of a new cryptocurrency starts to lose value if you basically choke off the capacity to get money into and out of the financial system through stablecoins."

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