T

he amount of USDT generated on the Tron and Ethereum blockchains decreased dramatically from $7 billion to $1 billion between January and June of 2024. This indicates that demand and trade activity on these networks are declining. 

Since USDT is the most widely used stablecoin, it plays a huge role in transactions and trades and this drop in minting shows that the market dynamics is changing. An increase in trading activities generates more USDT to finance these transactions and the fall in issuance means a decline in demand and prices during the half of 2024.

A graph showing USDT Total Supply Ethereum and TRON
Change in Monthly Supply of USDT on ETH and TRON

The Impact on Bitcoin and Altcoin Prices

Higher levels of USDT generation are historically associated with a rise in the value of Bitcoin and altcoin suggesting a greater capital inflow into the crypto markets. However, this time is different. Most prices dropped in June as the minting reduced. This unusual correlation suggests that until USDT issuance on Ethereum and Tron picks up again Bitcoin and major altcoin prices might continue to drop.

Advancements in Ethereum Scaling

Ethereum transactions became more expensive because of the gas fees and since then, notable progress has been achieved in scaling the network. Since Ethereum L2 solutions like Arbitrum and Optimism were introduced, costs have decreased and transactions have improved.

Improvements such as proof of stake via the Merge and programs like Danksharding have the ability to push Ethereum's transaction capacity over Visa's. As fees continue to drop, consumers may decide to choose affordable yet centralized alternatives like Tron instead of minting USDT on Ethereum layer 2 solutions.

Tether is leaving networks

In June, Tether announced its decision to stop creating USDT on the Algorand and EOS blockchains. However, the redemption process will still be operational, for another year. The total issuance of over $110 billion USDT has happened across more than 10 blockchains so far. Even though Tether maintains partnerships with networks like Tron there are concerns about centralization on some blockchains it depends on. If not resolved these concerns could potentially hinder the growth of USDT and stablecoins, in the future.

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