Tether reaches record as jittery crypto investors flock to stability

• Tether’s circulating supply rose above $83.2 billion, setting a new record for the stablecoin.
• Investors flocked to Tether as competitors faced banking issues and the regulatory clampdown in the US.

Tether’s total circulating supply reached a new high above $83.2 billion on Thursday as the tumultuous start of the year drove investors to the stablecoin over its competitors.

That represents a jump of 25% from about $66 billion at the start of the year, according to DefiLlama data.

In comparison, the second-largest stablecoin in circulation, Circle’s USDC, saw its supply plunge 35% to almost $29 billion in the same period.

Investors flocked to Tether after rival issuer Circle faced scrutiny over its reserves and after the New York Department of Financial Services ordered Paxos to stop issuing Binance USD.

The stablecoin issuer’s latest attestation showed a net profit of $1.48 billion during the first quarter — a portion of which will be used to buy Bitcoin to add to its reserves.

Banking meltdown

Tether has captured the majority of stablecoin trading volume since March, JPMorgan analysts noted last week.

The uptick in trading was buoyed by a string of events and setbacks for its rival stablecoins at the start of 2023.

For example, the US regional banking crisis that saw lenders like Silicon Valley Bank and Signature Bank collapse saw Tether’s circulating supply jump by around $9 billion in March alone.

NOW READ: Stablecoin with 40% of its reserves in Signature defies bank crisis fallout

At the same time, Circle, the company behind the USDC stablecoin, briefly lost its peg to the US dollar in March during the banking meltdown. The stablecoin depegged as the issuer delayed sharing details on its exposure to Silicon Valley Bank, which rattled investors.

That resulted in a record $4.5 billion in outflows over the weekend of March 11.

MakerDAO’s DAI also lost its peg to the dollar, JPMorgan crypto analyst Nikolaos Panigirtzoglou, said last week. DAI is backed by multiple stablecoins and cryptocurrencies, including Circle’s USDC.

USDC and DAI regained their peg to the US dollar following interventions from the FDIC and the Federal Reserve to guarantee all deposits and backstop banks, JPMorgan analysts added.

Paxos problems

Tether also benefited from regulators sanctioning Binance USD issuer Paxos in February.

Paxos was directed to stop issuing BUSD by the New York Department for Financial Services. Tether’s circulating supply increased by around 3% following the announcement whereas BUSD’s circulating supply has fallen by about 60% to $5 billion since Paxos stopped issuing the stablecoin

Since the NYDFS decision, Tether has seen “tremendous growth,” Binance CEO and co-founder Changpeng Zhao tweeted on Thursday..

Tether has recouped all losses incurred following the market tumult over the past year.

In May 2022, Tether’s circulating supply was around $83 billion before the collapse of the Terra stablecoin accelerated the market downturn.

Market conditions were exacerbated by the demise of FTX in November — when Tether’s circulating supply fell to $65 billion.