USD Tether (USDT), the world’s largest US Dollar stablecoin has now once again surpassed Ripple’s native XRP token when it comes to the important metric of market capitalization. The coin passed XRP to become the third most valuable crypto in the world after Bitcoin and Ethereum with a market capitalization of around $13.4 billion at press time compared to $13.1 billion of XRP.
This is not the first time USDT has surpassed XRP as back in May of this year, the same move also happened for a brief period before XRP overtook USDT again. The price index of XRP has since taken quite a jump after May 2020 while new Tether coins have been slow to be minted but eventually, the latter’s hard cap overtook the former’s again.
The stablecoins especially the USDT are a unique existence within the cryptocurrency market. With a price index usually as close to the $1 value, these coins see the market caps increase only when new coins are minted at their respective treasuries. Similarly, the market caps decrease when existing coins are redeemed or reclaimed in the treasuries for fiat.
So, it is perfectly normal for USDT to see its circulating supply fluctuate over time, often by hundreds of millions of Dollars. There is no overall hard cap for the stablecoins as new coins can be added in the treasuries by users at will. So, potentially, USDT can surpass Ethereum and Bitcoin itself one day but right now, it is a tough task.
Regular cryptocurrencies like Bitcoin, Ethereum, XRP and others on the other hand have a fixed overall supply and it cannot be tampered by anybody. So, their values increase based on the price index alone and thus, they are considered extremely volatile. Stablecoins are not normally considered a threat to the conventional cryptocurrencies and their working as they are mostly used right now for exchange USD transactions and there are a number of them out there including USDT, Paxos Dollar, Gemini Dollar, USD Coin and others.
However, in recent times, the stablecoins are also being widely used for direct borderless transactions and if this trend increases, they will start eating into the share of conventional money transfer companies. They are decentralized and bypass much of the red tape associated with normal USD transfers so they are a credible alternative to the conventional payment gateways.
A senior XRP executive Emi Yoshikawa also brushed aside any competition between XRP and the USDT. He said:
We believe that various stablecoins and CBDCs will create synergy by responding to the liquidity problem by bridging independent crypto assets, XRP”
XRP however may respond immediately to this threat even if the stablecoin is not viewed as a threat by its management.
Image source: pixabay.com
Don’t worry, we hate spam too
one weekly digest, just the important stuff.
