Stablecoin Surge: Tether's Headroom for Growth

The stablecoin already enjoys a dominant position in stablecoins and its integration with the TON (Telegram) network could boost it further, says Sylvia To, head of partnerships and token research at Bullish.

AccessTimeIconMay 8, 2024 at 4:00 p.m. UTC
Updated May 10, 2024 at 2:41 p.m. UTC

The market cap for stablecoins has grown considerably in the past six months, increasing from $122 billion in October 2023 to $157 billion in April 2024. Among stablecoin providers, Tether (USDT) has captured a significant market share, exceeding $100 billion and accounting for over 70% dominance in the stablecoin market.

Building on this momentum, Tether's Q1 2024 attestation report disclosed a record $4.52 billion profit from U.S. Treasury holdings, generating $1 billion in net operating profits. The number of active Tether addresses (non-zero balances) as of April 28 rose to 5.6 million.

This poses the question: What is the growth headroom for this stablecoin giant?

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We delve further into the decentralization of these wallets through the Herfindahl Index. This index, repurposed to measure the market concentration of Tether wallets, calculates the shares of the total supply held by different addresses by summing the squares of each address's balance in the network. A high score indicates that the supply is concentrated in a few hands, while a low score suggests a more evenly distributed supply among many addresses.

Tether 30 day moving average

Source: Glassnode as of April 30, 2024.

Above, we see the Herfindahl index scores for different stablecoins: 0.00708164 for USDT, 0.00981202 for USDC, and 0.00331652 for DAI. Among the top three stablecoin providers, DAI has the most evenly distributed supply across addresses, followed by USDT, and then USDC.

The recent introduction of USDT on the TON network may decrease its Herfindahl score and achieve a more evenly distributed supply. Telegram, which claims 900 million monthly active users, announced in April that USDT will be natively supported on TON. This move could influence the distribution of Tether wallets significantly.


Source: DefiLlama as of May 6, 2024.

When examining the top three blockchain platforms and their stablecoin usage, TRON transactions are heavily dominated by USDT, with a dominance of 98.2%. On TRON, USDT transfers typically range from 95 cents to approximately $2, though gas fees can vary. Meanwhile, the TON wallet is natively integrated into the Telegram app, allowing users to conduct peer-to-peer USDT transactions within the TON wallet for free. Transactions between two USDT users outside the wallet reportedly incur a network fee of 0.0145 TON, which equates to about $0.09 as of May 6 2024.


Source: Statista as of 2023.

The integration of USDT on TON, with its lower fees and faster transactions, could prompt users to switch from TRON to TON for frequent, small transactions. This is particularly relevant in Telegram’s top user countries as of 2023: India, Russia, the US, Indonesia and Brazil.

Most of these countries are key players in the global remittance market. India ranks as one of the top global receivers, while Russia sees significant inflows from its diaspora in Europe and former Soviet states. Indonesia benefits from remittances sent by its migrant workers in Malaysia and the Middle East. Brazil, on the other hand, is known more for sending remittances through its emigrants in the US, Japan, and Europe.

Tether's integration on the TON network, combined with its significant market share and the potential for a more distributed wallet system, could support USDT's expansion among Telegram's user base, boosting its usage in major remittance markets.

Edited by Benjamin Schiller.


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Sylvia To

Sylvia To is the head of token partnerships and research at Bullish and the author of "Bullish Insights."