In 2020, Bitcoin Is No Longer The World's Most Used Cryptocurrency

Bitcoin may be the first cryptocurrency, and the biggest by market capitalization—but in terms of trading volume, Tether leaves it in the dust.

In brief

• Bitcoin isn't the most widely used cryptocurrency; in terms of trading volume, it's left in the dust by Tether (USDT).
• Tether is a stablecoin that's pegged to the US Dollar.
• In 2019, Tether admitted in court documents that its stablecoin was only 74% backed by cash and cash equivalents.

When most people think of cryptocurrencies, Bitcoin (BTC) is undoubtedly the first that comes to mind. Not only is it the first cryptocurrency ever launched, it's also the largest cryptocurrency by market capitalization, and the most widely distributed cryptocurrency of all.

Despite this, however, it’s not the most widely used cryptocurrency. That accolade belongs instead to the USD-pegged stablecoin Tether (USDT), which, per data from CoinMarketCap, clocks in almost as much trading volume as the next three most popular cryptocurrencies combined: BTC, Ethereum (ETH), and XRP.

Available as a token on more than half a dozen different blockchains, including Omni, Ethereum, EOS, Liquid, and Algorand, the US dollar-pegged stablecoin has weaved its way into practically every corner of the cryptocurrency landscape.

Now, with more Tether being printed each month than ever before, we take a look at the current state of play surrounding the world’s longest-standing stablecoin platform.

Tether: the current state of play

Tether claims each USDT unit is backed by an equivalent amount of cash. Image: Shutterstock

When the Tether stablecoin first launched in July 2014, it was almost immediately met with criticism—most of which focused on whether all the Tether in circulation were truly backed by US dollars held in a bank account, i.e. whether Tether was fully solvent.

As of November 2020, the stablecoin still hasn’t unequivocally proven that it's not operating a fractional reserve. In 2019, Tether admitted in court documents that its stablecoin was only 74% backed by cash and cash equivalents, though the Tether website states that its reserves may include “receivables from loans made by Tether to third parties.”

A number of DeFi-centric USD stablecoins have also sprung up in recent months, including BXTB’s yield-generating CHIP stablecoin which is backed by other stablecoins (like Tether), and Kava's USDX stablecoin—both of which are targeted directly at DeFi users, further challenging Tether in this area.

Still, if Tether is facing challengers, it's validation of the broader concept of stablecoins. "The demand for stablecoins is validated by the proportional market growth of other US-pegged stablecoins such as Binance USD," said Sim.

Other stablecoins aren't the only competition faced by Tether, though; central bank digital currencies (CBDCs) are looming large on the horizon.

Governments and regulators are turning their attention to stablecoins, too; in November 2020, the British Chancellor of the Exchequer tweeted that the Treasury would publish a consultation to ensure that "new privately-issued currencies, stablecoins, meet the high standards we expect of other payment methods."

And in the US, a proposed Congressional bill would require stablecoin issuers to have a banking charter and earn regulatory approval from the Federal Reserve, FDIC and other agencies. The bill's name, the STABLE act, appears to be a not-so-veiled dig at Tether; the acronym stands for "Stablecoin Tethering and Bank Licensing Enforcement Act".