USD₮ is the world’s largest and most widely used stablecoin, the premier choice for liquidity in an increasingly digitized financial stack that is the cryptocurrency ecosystem. Users rely on USD₮ for many different financial and day-to-day decisions and use cases.
For cryptocurrency traders, USD₮ may be used to purchase and settle derivatives contracts and products from exchanges all over the world. USD₮ is also a leading currency for purchasing crypto assets directly. USD₮ to crypto markets settle tens of billions to hundreds of billions of dollars of trading volume per day.
USD₮ is also utilized by countless crypto users to stabilize the value of their portfolios when moving between exchanges or when selling assets. De-Fi products are yet another area where USD₮ allows users to access financial services where traditional fiat currencies cannot.
Finally, USD₮ is even a tool for people who are not participating directly in cryptocurrency trading or use, but who are simply looking for an easy and cost-effective to make crypto transfers, purchase goods and services, or store crypto without being exposed to volatility of prices. For many people around the world, USD₮ may be the easiest way they can access dollar-based liquidity or make transfers to other countries.
But how did USD₮ grow into its role as the most widely used stablecoin? With a marketcap of $80 billion, many people struggle to comprehend how USD₮ grew to where it is today.
The Creation of USD₮
Tether was founded in 2014 under the name “Realcoin” but was quickly renamed to Tether the next month. The initial Tether tokens were issued on the Omni Layer which is built on top of the Bitcoin blockchain. Many people are surprised to learn USD₮ was first issued on top of Bitcoin!
In the beginning, USD₮ was an exploration of how dollar value-backed tokens could be built on top of blockchains, and how access to a stable cryptocurrency could benefit users and markets.
Users at this stage were very early adopters who were excited to experiment with new technology, and the total supply and marketcap of USD₮ was under $1 million.
Early Growth
In 2016 the marketcap of USD₮ crossed $1 million for the first time and by the end of the year crossed the $10 million mark for the first time. This marked the start of the rapid growth that would come to characterize USD₮ for the next several years.
At this time USD₮ achieved product-market fit in two keys ways. First, it allowed users of cryptocurrency exchanges to have access to a product similar to a digital dollar that could be easily integrated on exchanges that lacked access to traditional fiat infrastructure. Second, it provided users with a new way to store, secure, and transact value in a dollar-denominated way- without leaving a blockchain.
Both of these use cases were major drivers of the early growth of USD₮.
The Rise of Cryptocurrency Exchanges
By the end of 2017, the market cap of USD₮ had exceeded $1 billion dollars.
2017 was a watershed year for the entire cryptocurrency industry, it was marked by extreme enthusiasm and interest from a growing demographic of participants. This interest was reflected in surging prices, technical innovation, and the launch of countless new companies.
Many new exchanges launched and the winners surged in popularity. Some of these exchanges lacked any connection to the traditional fiat systems, users needed to deposit funds in the form of cryptocurrency.
While this wasn’t new, users had deposited Bitcoin into exchanges in the past, the lack of access to fiat currencies made USD₮ invaluable for this new generation of cryptocurrency users.
As trading volumes skyrocketed, more users wanted a way to denominate in dollars while remaining within various cryptocurrency exchanges. USD₮ provided these users with a tool that let them do just that.
The increase in trading volumes and the rise of new exchanges also created a new opportunity for professional funds. Funds started to realize that opportunities were emerging to move assets from one exchange to another to take advantage of pricing differences, or purchase assets only available on certain exchanges.
The challenge they faced is that using the traditional banking system to wire funds took too long and using other cryptocurrencies exposed them to the risk that prices could drop while they were transferring their capital.
USD₮ provided a robust solution where funds could convert their capital into a digitally native format and easily move it from one exchange to another. USD₮ also became a way for traders to convert their digital assets back into traditional fiat currencies through redemptions.
The Dawn of De-Fi
While enthusiasm and interest cooled off after the excitement of 2017, under the surface innovation continued to thrive. Decentralized financial applications (De-Fi) started to be developed, tested, and deployed.
De-Fi applications are unique in the sense that they allow complex financial transactions to occur without an intermediary and are fully blockchain-native. As such, they have no direct connection to traditional fiat currencies.
As De-Fi applications continued to experiment and grow, USD₮ became a key component in these tech stacks. Users needed a blockchain-native currency that also allowed them to store their value in a stable way, and USD₮ fulfilled this role.
Demand for USD₮ has only grown as users deploy more capital into various De-Fi platforms and applications.
Exponential Growth and the Maturation of Crypto Markets
2020 marked the beginning of both the exponential growth of USD₮, and what appears to be mainstream acceptance of cryptocurrencies as a mature financial technology and market.
At the beginning of 2020, the total marketcap of USD₮ was roughly $4 billion, while today it sits at $80 billion.
While the exponential growth of the last two years is still being driven by similar factors as what drove growth between 2016-2020, the magnitude has utterly transformed.
Users still want access to digitally native dollar-based liquidity, they still want to move USD₮ between exchanges, and they still want to access De-Fi applications. However, the last two years have been marked by a notable increase in the number of users, and the size of market participants.
More people are using blockchain-based assets than ever before, and USD₮ has solidified itself as a foundational pillar of these markets. Additionally, there has been a notable increase in the interest of institutional participants since 2020. USD₮ has grown into a core tool for funds and institutional participants, sometimes essentially taking the place of cash on balance sheets.
USD₮ Today
As more traditional users start to pay attention to cryptocurrency markets they are stunned by the size of USD₮ If they had paid attention to the most rapidly innovating sector in the world for any of the last 6 years, maybe the growth and size of USD₮ would not be so surprising to them.
USD₮ grew into its current role because users valued what it could do for them. While it experienced rapid growth, USD₮’s growth was organic and commensurate with the overall flow of capital into a rapidly developing market.
We are proud of the growth of USD₮ but even more so we are proud that millions of users have found that USD₮ adds value to their lives and allows them to do things that were not possible before.
