The use of stablecoins continues to grow, and Tether (USDT) continues to stand out prominently among them.
This is what emerges from the Q4 2022 report of CoinsPaid, a crypto payments processor with a multi-currency wallet.
The report reveals that the most popular cryptocurrencies for payments are precisely stablecoins.
Summary
Stablecoins: Tether (USDT) leads the market
Indeed, stablecoins are the equivalent of fiat currencies in crypto, and given that fiat currencies are basically transactional currencies (i.e., means of payment), it should come as no surprise that in crypto it is mainly stablecoins that are used for this purpose.
In fact, fiat currencies are not widely used in the crypto sector, except to buy cryptocurrencies or cash in on any gains, because they are not as quick and easy to move as stablecoins.
For example, it is simply impossible to move fiat currencies from one exchange to another, not to mention the fact that crypto transactions cannot be censored while fiat transactions can.
Those who operate with cryptocurrencies prefer stablecoins to fiat currencies because they virtually eliminate all the classic obstacles and limitations to which fiat currency money transfers are still subject.
Not to mention the costs of international transactions, which in stablecoin are identical to those for domestic transactions, while in fiat currencies they are higher.
The Tether (USDT) stablecoin
CoinsPaid‘s report states that on their platform, transactions in USDT in 2022 increased by as much as 488%, with an overall increase in stablecoin transactions from 2% in 2021 to 9%.
The four main stablecoins, now that UST has virtually disappeared, are all pegged to the US dollar, and therefore used worldwide.
Outside the US, fiat dollars are much less used than local fiat currencies, while as far as stablecoins are concerned, those in dollars are widely used by everyone around the world in the crypto sector.
Nevertheless, it remains very curious that the use of USDT has been on the rise in the year when there were many fears about its stability after the implosion of UST.
It is worth mentioning though, that the stablecoin pegged to the Terra/Luna dollar was an algorithmic stablecoin, that is, not collateralized in dollars or dollar-like assets.
In 2022, no major stablecoin fully collateralized in dollars or dollar-equivalent assets imploded, which is perhaps why the fears spread in May then simply disappeared.
Indeed, with BUSD’s problems it was Tether that benefited the most, not least because its main competitor, USD Coin (USDC), suffered from similar fears to those that arose from BUSD’s problems.
Thus, paradoxically, during Tether’s worst year of the last crypto market cycle USDT has actually strengthened, especially against its major competitors.
One of these, UST, has even disappeared, while BUSD and USDC have had some problems, all the while maintaining a peg with the dollar. The fifth most important cryptocurrency, DAI, now becoming fourth after the implosion of UST, is algorithmic, and thus does not seem able to challenge the top two.
The exit in fiat, or stablecoins
It is possible that the main reason why stablecoin transactions increased so much in 2022 is trivially the rush to sell cryptocurrencies after the 2021 boom.
Indeed, many took advantage of the fact that they were in profit after buying in previous years at much lower prices, but not everyone sold by cashing in on fiat currency.
Indeed, on crypto-to-crypto trades, such as those between cryptocurrencies and stablecoins, in several countries no taxes are paid on any capital gains, so they are often preferred to fiat currencies precisely to avoid capital gains taxation.
At that point it is also understandable why stablecoin payments have increased, since once they are cashed in they do not have many concrete uses except as a means of payment to buy other cryptocurrencies, or services, or tangible goods.
In addition, there was also a kind of “flight” from cryptocurrencies in 2022, due to the collapse of their market value.
CoinsPaid for example reveals that during the collapse of FTX, in November and December 2022, the number of transactions increased by 40%, compared to the same period in 2021, and the volume by 32%.
In fall 2022, the number of transactions in Bitcoin increased by 20%, 180% in Ethereum, and 13% in Litecoin.
Also note that Bitcoin’s dominance of transactions on CoinsPaid dropped from 78% in 2021 to 68% in 2022.
In other words, 2022 was a year of change not only for crypto markets, but also for the actual use of cryptocurrencies, and especially for stablecoins.
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