Tether, a cryptographic proxy of USD created in 2014 to give liquidity in crypto markets, has now solidly surpassed Bitcoin as the most traded cryptocurrency in the world.
According to the Sydney Morning Herald (SMH), Tether first surpassed Bitcoin in daily trading volumes back in April, and, “has consistently exceeded it since early August at about $US21 billion ($31.3 billion) per day.”
Data from today’s listings at CoinMarketCap show that, although BTC remains number one in terms of market cap (with a circulating supply of about $148 billion), daily trading volume is currently sitting at $13.36 billion.
In comparison, only about $4.13 billion tethers now circulate, but they are involved in about $16 billion USD worth of daily trades.
The news about prevalent use of tethers in crypto trading is significant because the coin and the companies behind it have mixed reputations.
First, ideological cryptocoiners take issue with tethers because, unlike the Bitcoin network, which is theoretically controlled by no single entity, tethers are issued by a private company called Tether, a subidiary of iFinex.
Tether has been characterized as “the central bank of crypto.”
Tethers were also issued, initially, on a private chain called Omni, but have now migrated to and are circulating on Ethereum, EOS, Lightning, Liquid and Tron blockchains.
Many hardcore cryptocoiners nonetheless seem willing to overlook tether governance conflict because tethers allow for convenient actions like exchange arbitrage and quick entry and exit of otherwise volatile crypto positions.
But Tether fans are also ignoring several other controversies, including the fact that Tether, iFinex and associated exchange Bitfinex are under investigation now in New York for alleged fraud.
The companies have also been dogged by whistle-blowers for years who claim tethers may not be backed by reserves as claimed (Tether has never produced a credible audit).
Other critics like Professor John Griffin of the University of Texas claim (paraphrased in SMH) that tethers used in market manipulation induced, “half of bitcoin’s run up in 2017.”
Griffin and grad student Amin Shams argued in a high-profile academic paper released in June 2018 that issuance of tethers was timed and used to make big buys of bitcoin and prevent the price from correcting in 2017.
This gave the public the impression that the Bitcoin was a juggernaut, and may have contributed to Bitcoin’s parabolic 2017 bull run.
Despite the increasingly credible critical outcry against Tether, the coin has only gotten more popular this year.
Tether appears to have found loyal users in Asia.
In late July, Coindesk reported that Tether had supplanted Bitcoin as the remittance crypto of choice among Chinese merchants selling bulk wares to Moscow shopping centres.
Jeremy Allaire of Circle, operators of the Poloniex crypto trading platform, told SMH that Asian traders are responsible for 70% of all crypto trading volume.
Asian traders are responsible for 70% of all #crypto trading volume
He also said these traders do not care about the problems at Tether:
“For many people in Asia, they like the idea that it’s this offshore, opaque thing out of reach of the US government…It’s a feature, not a problem.”
Tether is also supported by exchanges, many of which have had a hard time maintaining banking due to banks’ concerns about fund origins and their obligations to account for this.
“There’s this implicit support from all these exchanges to help Tether stay afloat,” said Dan Raykhman, former head of trading technologies for Galaxy Digital, which is now making his own platform.
Raykhman added the exchanges might be willing to bail out Tether if there is ever a catastrophe there.