Over the past few months, Tether’s USDT stablecoin has become increasingly important to the crypto market; the asset’s market capitalization has swelled as it has surged in adoption, now amounting for much of Ethereum’s network traffic.
Due to the growth, tracking the movement of USDT has given investors novel signals as to potential market trends. One such signal has seemingly appeared, with data indicating that leading crypto exchange Binance now holds a large sum of the stablecoin.
According to data shared by Jason Choi — a Wharton School graduate that is the Head of Research at crypto hedge fund The Spartan Group — there is now just shy of $1 billion worth of Tether “sitting on the sidelines on Binance alone.” This doesn’t count the other stablecoins that platform supports, including Binance USD, USD Coin, Paxos Dollar, and more.
Per the chart, this metric is up 1,000% from the mere ~$100 million worth of USDT on Binance at the $10,500 top in mid-February. A majority of the growth took place after the “Black Thursday” crash in the price of Bitcoin and other crypto-assets.
While a relatively odd metric to keep track of, the exponential growth in the amount of USDT stablecoin sitting on Binance signals one thing: there is likely a rapidly growing level of latent demand for cryptocurrencies.
Considering that the growth of Binance’s USDT was relatively steady, not marked by large spikes indicative of a direct deposit by Tether, it would suggest individual investors are sending their stablecoin onto the exchange en-masse.
The reason: they’re likely waiting to unload their USDT for cryptocurrencies, be that Bitcoin, Ethereum, or otherwise.
Importantly, it isn’t only USDT that has seen rampant growth: the past few weeks have seen a broad resurgence in the total value of stablecoins in existence, with Nic Carter from CoinMetrics indicating that the total value of these assets has been on a steep rally.
“Stablecoins collectively tacked on over $2b in March 2020 – by far their best month ever. Nontether stablecoins grew by $500m.”
As it stands, the value of all stablecoins has passed $8 billion, or approximately 4.2% of the entire public crypto market:
The sentiment goes that the market will reach a point where these investors will want to dump their stablecoin holdings for Bitcoin, causing a rapid rally higher in the crypto market.
Su Zhu, CIO and CEO and hedge fund Three Arrows Capital, summed up this sentiment well when he made the following apt comment in early-2019, a time when there was a mere $2 billion worth of value locked up in stablecoins:
“Theres an estimated $2B in cash sitting at crypto funds/holdcos. Theres another $2B+ sitting in stablecoins, and another $2B sitting at exchanges/silvergate/signature. […] Imagine thinking we need new money to hit $10k.”