During the last week, the stablecoin Tether (USDT) recorded its largest loss of capitalization since the collapse of FTX in November 2022.
The trigger for this decline seems to be the delisting of the coin on Coinbase, along with the various regulatory complications of Mica in Europe.
What does all this mean for the crypto markets? Let’s see everything in detail below.
Tether (USDT) loses ground in the market: the MiCA regulation pushes the stablecoin down by 1%
Tether (USDT), the largest stablecoin in the crypto market, has recorded a 1% loss in capitalization over the past week in the wake of the effects of MiCA.
Let’s talk about a drop of 1.46 billion dollars, which comes after two other negative weeks, bringing a total drop of 2.9 billion dollars from the peak of December 21.
Investors seem frightened by the advent of the new European regolamentazione “Market in Crypto Assets” (MiCa) and prefer to park their liquidità elsewhere.
Some exchanges based in the European Union are choosing to remove USDT from their markets, due to compliance issues with the regulations.
For example, the historic platform Coinbase recently chose to delist the asset, causing the spread of strong FUD on the stablecoin.
In the last 3 weeks, it loses a total of 2.3% of its market-cap, while still remaining perfectly pegged to 1 dollar.
MiCA took effect, Coinbase delisted USDt for its European users, FUD campaign on USDt being banned in Europe FUD launched…
…and USDt market cap reduced by a mere 2.3% since its height on December 21st.
— John Brown (@john_j_brown) January 1, 2025
The MiCa regulation, officially coming into force from December 30, 2024, requires crypto asset issuers to have a specific license to offer or publicly trade ART or EMT tokens.
An ART is a currency that seeks to maintain a stable value in reference to another asset like gold or fiat currencies. ERTs, on the other hand, replicate the value of a single national currency, just like USDT does.
The MiCa specifies in this regard that only authorized banks and financial intermediaries can trade ERT tokens to European customers.
In particular, it is necessary that these tokens like USDT are supervised by the European Banking Authority (ABE) and that they present a deposit of collateral assets at a credit institution based in the EU.
With MiCA, the stablecoin USDT effectively becomes illegal within the Euro area, even if the majority of its trading volumes occur elsewhere.
The cryptocurrency analyst Bitblaze stated that Asia represents the largest market share, minimizing the impact of the cancellations made by the new regulations.
The negative impact on the markets of Tether could be just part of a temporary FUD destined to disappear.
USDT records the largest drop since the collapse of the FTX exchange: what does it mean for the bull and bear markets?
As mentioned, the drop in USDT represents the largest loss since November 2022, a period in which the collapse of the exchange FTX was observed.
On that occasion, the cryptocurrency lost 4.32% of its capitalization in just one week, which at the time corresponded to an outflow of 3 billion dollars.
Another similar situation in which USDT experienced a severe drawdown was in May 2022, in the midst of the Terra-Luna bubble.
In both cases, the drop in the stablecoin coincided with an event that proved to be a catalyst for a significant movement.
In May 2022, while USDT was losing ground, the arrival of the bear market on Bitcoin and the entire crypto sector became apparent.
In November of the same year, the last bearish phase of the Bitcoin cycle was initiated, anticipating the following bull market.
This time, however, the difficulties of USDT might not have a significant impact as in the last occasions.
The market outlook is significantly different compared to that of 3 years ago, thus the capitalization of Tether appears much larger.
This drop in USDT is unlikely to represent the prelude to a new bear market, given the many positive factors in the market.
At the same time, we cannot claim to be facing a new bull market, as we are still in the midst of a bull cycle that started several months ago.
What happened to USDT appears with an atypical drop in capitalization in the current scenario, triggered by the FUD of the MiCA regulation and by the uncertainty of investors towards a phantom ban in Europe.
In any case, nothing worrisome, nor particularly exciting, for the short-term future of the bull and bear crypto speculative markets.
The changing scenario of the stablecoin sector: MiCA favors USDC
If USDT seems to be damaged by the MiCa regulation, there is another stablecoin that is gaining positive traction, namely USDC.
This latest one appears as a “MiCa compliant” coin as it meets all the constraints of the new regulation, such as the deposit of at least 60% of the reserves with suitable European banking institutions.
In the last 3 weeks, USDC has recorded a trend opposite to the competitor stablecoin, adding 1.7 billion dollars in capitalization.
To tell the truth, Circle’s currency has been growing since the beginning of 2024, when there was already talk of the potential effects of MiCa, even though during the same period USDT also rose significantly.
Now it is possible that the euphoria for USDC may wane, bringing capital back to the more highly quoted USDT.
We remind you that USDT represents the largest stablecoin in the entire crypto sector, with a value of holdings equal to 137.3 billion dollars.
USDC in comparison holds a market cap of “only” 43.7 billion dollars, less than a third of the first place holder.
On the Ethereum blockchain, the stablecoin of Paolo Ardoino (CEO of Tether) appears dominant at 62%, against the 25% of Circle’s rival.
In any case, it is at least evident that together the two coins represent the largest slice of the stablecoin market.
Other coins like USDe, DAI, and FDUSD cover marginal shares.
