Stablecoin issuer Tether (USDT) just announced their historic net profit of $4.52 billion in the first quarter of 2024. However, as a growing number of crypto companies and projects decide to join the stablecoin market, more coins pegged to the U.S. dollar may come and shake its status.
Highlights:
- USDC overtakes USDT in Visa’s transactions study, but USDT still has stablecoin dominance.
- TON and Tether collaborate to make seamless USDT transactions for Telegram users.
- Ripple XRP is planning to launch its stablecoin to compete with Tether’s USDT and Circle’s USDC.
- The stablecoin bill in the U.S. is likely going on hold again.
Tether (USDT)’s Substantial Financial Success in Q1
With a record-breaking net profit of $4.52 billion in the first quarter of 2024, Tether (USDT) also disclosed its net equity for the first time, from $7.01 billion at the end of December 2023 to $11.37 billion as of March 31, demonstrating Tether's significant expansion and financial stability.
Based on the report, Tether's excess reserves have increased by $1 billion, reaching a substantial amount of just below $6.3 billion. This surplus reserve, along with the company's reserve assets exceeding liabilities by over $6.2 billion, indicates a solid financial position.
Additionally, Tether holds a considerable amount of Bitcoin, with 75,354 BTC valued at over $4.38 billion in its "bc1q" wallet, making it the seventh-largest Bitcoin holder. An impressive unrealized profit of over 91% has accumulated, surpassing $2 billion.
The attestation report for Q1 2024 reveals that Tether has generated approximately $1 billion in operating profits from its holdings in the United States Treasury, with an additional $3.52 billion coming from market-to-market gains in Bitcoin and gold positions. The company's treasury portfolio exceeds $90 billion in US Treasury bills.
Tether (USDT)’s Drop in Market Share
Importantly, Tether has maintained its commitment to backing its stablecoins, with assets such as cash and cash equivalents accounting for 90% of the backing reserves. This reserve ratio remains consistent with the previous quarter, ensuring stability and confidence in Tether-issued stablecoins.
Overall, Tether has achieved substantial financial success, bolstered by its holdings, operating profits, and equity growth. However, data shows that USDT is gradually losing its market share due to the intense competition in the stablecoin market.
According to Kaiko’s research, USDT's market share on CEXs has been going lower, falling from 82% to 69% year-to-date (YTD). Conversely, Circle's USDC has seen an increase in market share, from less than 1% in 2020 to 11% now, indicating a rising inclination toward regulated substitutes.
Currently, 10% of total stablecoin trade volume is made up of USDC issued in the United States. (Don’t forget, USDC is the only one of the top five stablecoins by market capitalization that meets state money transmitter framework regulations in the United States.)
Visa on-chain analytics also substantiated the growing market share of USDC. The study done by Visa and Allium Labs showed that the volume of transactions in USDC has exceeded USDT since week 3 of 2024. On week 17 (April 22 to April 28), USDC totaled $466.69 billion, while USDT only got $148.31 billion.
TON Empowers P2P Payments Using USDT
Despite a declining market share, USDT still holds the biggest piece of the pie. It currently has a $110.64 billion market cap and constitutes more than 68% of the stablecoin market share, while the market cap of USDC is $33.5 billion, three times less than USDT.
More daily applications are considering the compatibility of USDT. For example, The Open Network (TON), the decentralized layer-1 blockchain, is now integrating USDT with Telegram. With this implementation, 900 million users on the TON network can now experience a new Web3 ecosystem of global peer-to-peer transactions. This also brings usability and scalability for the users by making cross-border transactions easy without the interference of intermediaries and with no limits for transactions in USDT. The user will be able to send USDT with just a message.
According to Tether, the TON network will receive 10 million USDT worth of tokens, with $3 million already issued to the company. This measure of collaboration and movement by both companies matches TON's aim to make every individual leverage cryptocurrency in their daily lives under Web3 services. This integration could be a milestone for the widespread global adoption of stablecoins.
Ripple (XRP) Is Aiming at USDT and USDC
For a long time, USDT and USDC have dominated the stablecoin market; others like DAI, FDUSD, or TUSD are just the challengers. But this dominance may not be sustainable, as Ripple (XRP) is planning to launch its own stablecoin by the end of 2024.
Ripple has recently announced that they are going to launch a pegged stablecoin to compete with Circle USDC and Tether USDT in the next five years. The coin will be released on the XRP ledger and the Ethereum blockchain.
According to David Schwartz, CEO of Ripple, the new stablecoin will capture volatility, provide liquidity, and identify potential arbitrage opportunities among various assets. "We think it (the stablecoin market) will be over $2 trillion by 2028, and there's only two market leaders. We don't think it's a winner-take-all-all ecosystem, particularly on the DeFi side." Said Schwartz.
He believes that the newly issued stablecoin can attract market attention and attract a significant amount of investment, as the company has strong credibility and financial stability to establish itself in the stablecoin market.
Stablecoin Bill Likely to Be On Hold
On the other hand, a regulatory framework for stablecoins is being urged in the U.S. Kristin Smith, CEO of the Blockchain Association, said it can “cement the U.S. dollar’s primacy around the world and ensure homegrown, responsible digital asset innovation flourishes.”
Recently, lawmakers in the U.S. House of Representatives have been pushing to introduce a stablecoin bill draft. “The Lummis-Gillibrand Payment Stablecoin Act," which was initiated by U.S. Senators Cynthia Lummis and Kirsten Gillibrand, aims to define dollar-pegged digital asset issuers and the way they issue stablecoins.
The act intends to protect consumers by requiring stablecoin issuers to maintain one-to-one reserves and prohibiting unbacked algorithmic stablecoins so as to prevent illicit or unauthorized use of stablecoins by issuers and users. It also intends to create federal and state regulatory regimes for stablecoin issuers that preserve the banking system.
The proposal on stablecoin regulations had been delayed, and it is said that the bill will be tacked onto the Federal Aviation Administration reauthorization bill, which is running out of time, as early as this week. However, a Democratic aide with knowledge of the negotiations reportedly stated that House and Senate leaders are demanding a clean FAA reauthorization that forbids the addition of a stablecoin bill. Given that it is a presidential election year, enactment still looks difficult.
If you are interested in stablecoin investment and want to know more about them other than USDT and USDC, go check out CoinEx; you might have more alternatives than you think.
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