Tether (UDST) has overtaken Ripple (XRP) in the market cap ranking as the world’s largest stablecoin. This comes at a crucial time, as the cryptocurrency market has been experiencing an absolute surge for weeks. While Bitcoin and Ethereum remained unchallenged in first and second place in this autumn run, the third place on the podium is far more contested.
Yesterday, Tether clearly prevailed over XRP: The crisis-ridden blockchain project Ripple, with a market cap of 15.9 billion, clearly fell behind, while the US dollar-pegged Tether stablecoin rapidly caught up, beating XRP by a long way with a market cap of 20.4 billion.
Tether has been ahead before
The recent movement of the third and fourth places is not new in the 2020 crypto market. Tether was already ahead this year in May and September, surpassing XRP as the third largest cryptocurrency by market cap, but crashed afterwards. The reason for this was emerging doubts as to whether the stablecoin Tether is actually sufficiently secured by capital reserves and can actually maintain its price peg to the US dollar.
This discussion is now off the table, because confidence in Tether has grown strongly. In addition, Tether’s jump to the top spot is trend-setting, because USDT, as the acronym is called, is used for buying and selling other cryptocurrencies and is a reliable indicator of trading activity and thus sentiment in the cryptocurrency market.
XRP crash due to SEC lawsuit
The drop in XRP comes at the worst possible time, as yesterday the US financial markets regulator SEC announced a fat lawsuit against San Francisco-based Ripple, causing the XRP coin to fall a further 25%. Ripple and its founders Garlinghouse and Chris Larsen are accused by the SEC of taking a whopping $1.3 billion over the years in a securities offering for digital assets.
Ripple’s lurching price
Ripple is further burdened by a lurch in its business model: as recently as the summer, Emi Yoshikawa, Ripple senior director of global operation, claimed that XRP does not compete with either stablecoins or central bank digital currencies (CBDCs). According to Yoshikawa, Ripple was supposed to develop in a complementary way to stablecoins and CBDC. This direction is now being changed, as last week Ross Edwards, Ripple Global Head of Client Solutions made people sit up and take notice when he gave CBDCs and blockchain technology a key role in shaping the future of a global and interoperable financial system in a presentation.
Edwards emphasised that Ripple has built good relationships with the existing financial ecosystem through its partnerships. Ripple’s clients include some of the world’s major financial institutions such as Banco Santander and Bank of America. In addition, Edwards pointed out that Ripple is developing products, solutions and initiatives to provide businesses with a next-generation cross-border payments infrastructure, as he explained in a presentation on 14 December 2020.
Specifically, Edwards believes that Ripple’s products will be used to address and solve real-world problems, adding that “…Ripple is able to further leverage this technology as infrastructure suitable for the exploration, ideation and eventual deployment of a fully functional CBDC.” So CBDC after all: Ripple plans to position itself as an infrastructure provider for central bank currencies. The SEC’s lawsuit could permanently tarnish Ripple and massively impact its CBDC strategy.
Tether’s 3rd place sustainable?
Yes, Tether is likely to hold third place and prevail over Ripple in the long run. This is because Tether’s high market cap runs parallel to massive growth in other stablecoins this year. Both Tether and the stablecoin USDCoin (USDC) have recently cleared important hurdles, with USDC passing the US$1 billion trading volume mark in July 2020.
Unlike volatile crypto assets such as Bitcoin (BTC), stablecoins such as USDT and USDC are designed to provide a digital version of fiat currencies with a fixed peg to the US dollar, ensuring a ‘stable’ price. The one-to-one peg to the USD means that the price of Tether is always equal to one US dollar.
As a stable cryptocurrency, Tether is by far the largest cryptocurrency in terms of daily transaction volume. It is also exciting that at the time of going to press, Tether’s daily trading volume was more than 73 billion US dollars, while Bitcoin only has 45 billion in 24h trading volume.
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