Tether’s USDT briefly became the largest crypto asset by market cap, surpassing Ethereum on June 26. This was followed by a sharp drop driven by Bitcoin, which dropped the ETH price to as low as $1.51k.
Notably, the prolonged price decline has reduced ETH’s market cap to $184.4 billion, slightly below USDT’s $186 billion market supply.
The Friday move and the resulting short change were entirely due to prolonged selling pressure. Long-term price decline ETH It could cause USDT to deal another blow to its position as the second largest asset.
However, this does not mean that market sentiment is no longer bullish on ETH as it depends on a broader market movement. His It is worth noting that during such volatile scenarios, investors exit crypto positions and convert funds into stablecoins.
Therefore, these risk aversion moves during volatility will directly increase the supply of stablecoins. Therefore, it was not much of a surprise that USDT, the world’s largest stablecoin, briefly overthrew ETH.
Stablecoin growth slowed in the second quarter
Perhaps USDT and broader stablecoins also recording redemptions could be a more structural shift that would highlight capital outflows.
This means investors are not just parking capital in stablecoins to wait out declines, they are exiting the crypto market altogether.
Interestingly, despite USDT briefly reversing ETH, the market has seen broader capital outflows since late May.
Especially, stablecoin supply It has decreased slightly from its last peak of $322 billion in mid-May to $313 billion as of writing. In other words, nearly $10 billion has retreated in the last six weeks, coinciding with the broader correction in top crypto assets, including BTC.
What does USDT’s 9% market share mean for crypto?
From another perspective, this has represented a broader risk-off in crypto markets, although several altcoins have posted impressive recoveries recently.
In fact, this quiet market has been further strengthened by the USDT market dominance and ETH/BTC ratio, which track risk sentiment and altcoin season respectively.
Notably, the ETHBTC rate has fallen lower since mid-May, underscoring the slow pace of the broader altcoin season rally.
During the same period, USDT market share increased from 7% to 9%, levels last seen at the tail end of the 2022 bear market. Simply put, investors were extremely cautious and parked their capital in stablecoins.
Overall, USDT displacing ETH in market value is not a cause for concern. But the most important sign was that increasing USDT dominance has reached 2022 bear market lows.
Final Summary
- USDT briefly reversed ETH’s market cap after ETH supply dropped to $184 billion on June 26.
- USDT’s market share has increased to 9%, approaching levels last seen at the bottom of the 2022 bear market.
