Towards the end of last week, Silvergate discontinued its 24/7 instant settlement exchange network, SEN. Notably, institutions that used the said platform to move funds to cryptocurrency exchanges. Right from Kraken to Gemini and Binance.US, a host of prominent names from space were the bank’s clients.
A recent analysis report from Kaiko pointed out how the said situation could be a boon for stablecoins, for they could be used to fill the void created by Silvergate.
SEN was notably one of the only fiat payment rails in the crypto industry. Without it, Kaiko noted, “liquidity could suffer.” Even though Signature Bank seems to be another banking alternative, stablecoins could step up. Elaborating on the same, the report highlighted,
“Specifically, it will become harder to quickly deploy fiat capital via exchanges, with Signature Bank now one of the only banking alternatives. But of course, there is another widely-used on-ramp into crypto: stablecoins.”
It added,
“With the death of SEN, stablecoins will likely become even more ubiquitous among traders. Rather than deposit your dollars with an exchange, you deposit them with a stablecoin issuer, receive stablecoins, and then transfer those to an exchange.”
However, there’s a catch. Even if traders opt for the stablecoin path, issuers, at the end of the day, will still need access to a cryptocurrency bank. Thus, the risk could get more “concentrated.”
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The rise of Tether’s dominance
Tether’s dominance has been on the rise over the years. Since 2017, the market share of USDT’s trade volume for BTC trading pairs has gone from 3% to 92%. In fact, it recently attained an all-time high. The role of the U.S. dollar in crypto trading, on the other hand, has been shrinking. The report pointed out,
“Since the FTX collapse, USD market share has fallen consistently relative to USDT, USDC, and euro trading pairs.”
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Of late, market participants, both retail and large whales, have been accumulating Tether. Data from Glassnode revealed that the transaction volume and exchange outflow volume of USDT reached new one-month highs recently. Specifically, their readings revolved around 37,383.649 USDT and 38,124,789.998 USDT at press time. Parallelly, the supply held by the top 1% also clinched a new local high, adding credence to the narrative.
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