Why The World’s Most-Used Cryptocurrency Isn’t Bitcoin
Author: Mru Patel, Partner and COO of Flash Group, CEO of Sapian Capital
A recent study has shown that Bitcoin still remains the world’s largest cryptocurrency, representing 70% of the entire digital-asset world’s market value, but when it comes to trading, another cryptocoin is number one. Bitcoin might be the most famous cryptocurrency all over the world, however, the token with the highest trading volume is the stablecoin Tether.
Tether’s monthly trading volume is about 18% higher than that of Bitcoin, while its market capitalization is more than 30 times smaller, according to data offered by CoinMarketCap.com. Tether leads with $20.7 billion in trading volume, whereas Bitcoin comes second with $17.2 billion.
Why do people trust stablecoins?
This news might come as a shock for many, but looking at the bigger picture of cryptocurrency, it all makes perfect sense. Tether is the most used stablecoin in the world, most likely due to the fact that it’s pegged 1:1 against the US Dollar. Stablecoins are tokens pegged against assets like gold, real estate, stable fiat currencies reserves, etc. in order to avoid price fluctuations. Even though Tether has a controversial history, it is the world’s largest and most used stablecoin, claiming the title of the most important cryptocoin in the ecosystem, despite the severe past accusations of manipulating the market. The reason behind this is that stablecoins are seen with more trust, as they are backed by real, tangible assets, compared to the rest of the cryptocurrencies. In the financial transactions world, when people transfer funds in volume, they need to ensure that the recipient gets the exact amount of the agreement, without much fluctuation within a day or so.
Risk versus Security
Since 2014, when the first Tether tokens were issued, the stablecoin has retained its value, hence people still trust it, in the world of financial transaction of over $7 Trillion daily. Despite the controversies surrounding it, Tether is still a strong coin that offers stability. People want a decentralised currency that is pegged, hence stable.
If you are wondering why Bitcoin is not the most traded cryptocurrency, there might be a very simple answer. Bitcoin is the most expensive and popular cryptocoin (8,170.01 US Dollars at the time of writing), but is not backed by anything. People are looking for secure coins designed to minimize the volatility of the price, pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals) for daily volume-based financial transfers globally.
In conclusion, even though it was a surprise that Bitcoin is not the most traded cryptocoin, there are pragmatic reasons behind this. We’ll see for how long Tether will maintain the title it just gained, but people will always choose security and stability and they will try to avoid risk when it comes to their daily financial transactions.