Tether PUMPING BTC!? Why Stablecoin Market Cap Matters!!

The market cap of tether's usdt Stablecoin has hit an all-time high many Are taking this as a sign that crypto is About to pump especially since tether Has announced that it will begin buying BTC every month However this doesn't tell the full story The total market cap of all stable coins Has been declining with circles usdc and Paxos's busd seeing the largest losses At the same time the market cap of Archblocks TUSD stablecoin has doubled So today I'm going to tell you what These changes in stablecoin market caps Could mean for the crypto market and Explain why some of them could be at Risk of collapse this is a video you Cannot afford to miss I want to start by explaining how stable Coins work because it's something that's Not understood and it's something that You need to understand for the purposes Of this video as almost all of you will Know stable coins are tokens on Smart Contract cryptocurrency blockchains that Are pegged to Fiat currencies mainly the USD Some of you will also know that there Are many different types of stable coins For the purposes of this video the only Type you need to be familiar with is the Centralized stable coin centralized Stable coins are centralized because They are minted burned and fundamentally

Controlled by a centralized company These centralized companies also ensure That their respective stable coins Maintain their Fiat pegs they do this by Minting or burning the supply of Stablecoin in circulation based on Demand now that said it's often their Users who mint and burn these stable Coins the centralized companies just Facilitate it this is because every Centralized stablecoin is backed by an Equivalent amount of assets at least in Theory now believe it or not but most of The stable coins in circulation are Backed by U.S government debt this is Because U.S bonds are easy to buy and Sell in large amounts and they create Passive income via yield If you watched our video about the Company taking over crypto you'll know That stablecoin issuers have been making A lot of money from the interest on the Reserves backing their stable coins this Is why tether's recent announcement that It will buy BTC with a portion of its Record profits is so significant but I'll come back to that later now the Reason why stablecoin users mint and Redeem stable coins is simple Arbitrage Because stable coins can be minted and Redeemed for equivalent amounts of fiat Currency changes in a stable coin's Price create an opportunity for massive Profits at least for stablecoin whales

Imagine that the demand for usdc is Suddenly very high the increase in Demand will cause usdc's price to go Slightly above its one dollar peg this Incentivizes one of circle's users to Mint usdc to make a small profit by say Buying usdt with it this increase in Supply eventually brings usdc back to Its one dollar Peg Logically the same is true in Reverse if The demand for usdc is suddenly very low Then the decline in demand will cause Usdc's price to go slightly below its One dollar peg this incentivizes one of Circle's users to burn usdc to make a Small profit in real USD this decrease In Supply eventually restores usdc's Peg Now if you look at the market cap of any Stable coin on a shorter time frame You'll notice that hundreds of millions Of stable coins are minted and burned Every day sometimes billions more Importantly you'll notice that these Mints and burns occasionally happen Outside of banking hours in the United States this is only possible because of Specialized 24 7 payment systems that Are only offered by a handful of Banks Without these Payment Systems it's Possible for stable coins to depeg During off banking hours because it's Not possible for stablecoin issuers to Mint and burn stable coins based on Market demand if you've been keeping up

With our coverage of the crypto Crackdown you'll know that U.S Regulators have been targeting these 24 7 Payment Systems presumably because They compete with the fed's upcoming fed Now payment system many of the banks Offering these systems have also gone Under but again I'll come back to that Later so given these facts we must ask What causes the demand for stable coins To increase or decrease and how this Affects crypto prices The answer ultimately depends on the Stable coin in question so let's go down The list shall we okay first up we have Tethers usdt as I mentioned in the Introduction usdt's market cap recently Surpassed its previous high of 83.2 Billion USD as you can see usdt's Previous High happened shortly before The collapse of terror's UST stablecoin Last spring Usdt's market cap declined immediately After this makes sense considering that The primary demand driver for usdt is Crypto trading specifically leveraged Trading Usdt is used for crypto trading because It's basically an offshore dollar it's The ideal alternative for crypto Exchanges which can't get access to Actual US dollars for whatever reason so When the demand for crypto trading goes Up the demand for usdt follows suit this

Causes usdt to go slightly above its Peg Which incentivizes tether users to Mint Usdt for a profit the demand for crypto Trading tends to rise and fall with the Crypto Market hence the correlation to Crypto prices Besides crypto trading usdt's primary Demand driver is apparently payments and Offshore dollar Holdings in a recent Interview tether CTO Paolo Arduino Revealed that the demand for usdt was Purely crypto trading prior to the Pandemic since the pandemic it's 60 40 Trading and offshore dollar holding this Again makes sense considering that Tether is relatively unregulated at Least compared to the other stablecoin Issuers this makes usdt the preferred Stable coin for any people who happen to Be based in countries that aren't too Friendly with the United States but who Want to hold their wealth in a de facto US dollar Now to be clear I'm not implying that Usdt is being used to evade sanctions Tether has a long history of freezing Usdt Holdings to comply with U.S Sanctions and requests by U.S law Enforcement the same is true of all the Other stablecoin issuers remember these Centralized stable coins are centrally Controlled now the trade-off of tether Being relatively unregulated means that It's not as transparent as the other

Stablecoin issuers for instance it's not Entirely clear where Teva is based it's Believed that teller's parent companies Are reportedly based in Hong Kong but Its Executives appear to be based in Switzerland what is clear is that tether Has been using Dell tech Bank and Capital Union Bank to custody the assets Backing usdt both banks are based in the Bahamas it was also recently reported That a U.S financial services firm Called kentel Fitzgerald was managing Some of the assets backing usdt Unfortunately records of the assets Backing usdt are spotty tether only Occasionally publishes attestations of Its reserves which are not the same as Audits whereas audits involve a thorough Investigation of assets attestations Essentially involve legally swearing That the assets are there in any case Tether's most recent attestation was Released in March it notes that almost All the usdt in circulation is backed by U.S government debt and similar cash Equivalent instruments the rest is Backed by a combination of precious Metals corporate debt loans and even Bitcoins BTC As part of the attestation tether also Revealed that it had made a profit of 1.5 billion dollars on its reserves in Q1 and had excess reserves of almost 2.5 Billion this is reassuring considering

That the excess reserves are almost Equal to the lower quality assets Backing the usdt in circulation as I Mentioned earlier tether recently Announced that it would begin using up To 15 of its monthly profits to buy BTC Which could have a positive impact on Btc's price given current market Conditions Palo specified in his Aforementioned interview that tether Will not be investing in any old coins Now he was also asked whether an Increase in the stablecoin market cap is A leading indicator for crypto prices Palo said yes but stressed that the Total stablecoin market cap continues to Decline interestingly Paulo seemed to Imply that the total value locked in Defy is a better indicator This ties into the second stable coin And that's circles usdc as I mentioned In the introduction usdc's market cap Has been falling fast Circle CEO jeremia Lair blames the ongoing crypto Crackdown In the United States and he's partially Correct as you can see the Catalyst for The decline was usdc's d-peg in March if You watched our video about usdc's Deepeg you'll know that it was caused by The collapse of Silicon Valley Bank or Svb which was holding a portion of the Assets backing usdc Thankfully Circle got these assets back After depositors were bailed out and has

Since switched to larger more stable Banks now in contrast to usdt usdc's Primary demand driver is defy this is What makes Paulo's previous response so Interesting it essentially implies that Usdc's market cap is a better leading Indicator for crypto prices if this is The case then the crypto Market is in Deep trouble because usdc's market cap Keeps declining this could also mean That circle is in deep trouble because Circle makes most of its money from the Interest on the assets backing usdc if Usdc's market cap continues to decline Then circles profits will follow suit The same is true for coinbase which Earns a nice chunk of its income from Usdc reserves this is because coinbase And circle make up the center Consortium Which governs the usdc stablecoin as Such it's in their mutual interest that Usdc's market cap continues to increase Lo and behold coinbase has recently Launched offshore derivatives exchange Offers all trading pairs against usdc a New demand driver On that note it's not entirely clear why Usdc isn't being used more for crypto Trading outside of the US the only Explanation I can think of is that Circle is based in the US and closely Affiliated with powerful U.S Institutions which are in turn closely Connected to the U.S government

BlackRock is one of many Even so circles affiliation with these Powerful institutions simultaneously Implies that usdc is the safest stable Coin because it's assumed that said Institutions wouldn't let it collapse After all the world economic Forum wants To develop a synthetic Central Bank Digital currency and it will presumably Leverage circles technology Anyway conspiracy theories aside circles Affiliation with these powerful Institutions does in fact make usdc the Safest stablecoin aside from the fact That its reserves are held at a too big To fail bank and managed by the world's Largest asset manager Circle publishes Monthly attestations and provides a Real-time feed of usdc's reserves as I Mentioned earlier an attestation is not The same as an audit but what makes Circles attestations different from Tethers is that Circle provides the Serial numbers for the U.S bonds and Bills that back usdc this means that you Can independently verify that one of Circle's Affiliates is holding these Assets Similarly to tether Circle has been Spending most of its extra money on Expansion and development on the Expansion side Circle recently set up a European headquarters in France it also Introduced a Euro stablecoin last year

And is reportedly planning on Introducing a British pound stable coin Soon as well Circles end game with these Endeavors is Ironically enough to turn these stable Coins into de facto cbdcs Jeremy tacitly Admitted this in a recent interview and It's the inherent end game of all Centralized stable coins that's why Decentralized stable coins are so badly Needed but that's a topic for another Time Meanwhile on the development side cross Chain interoperability has been one area Of focus for Circle digital ID has been Another via its Verity platform it just So happens that both Technologies are Required to take defy to the next level And yet Circle insists that usdc's Primary demand driver is peer-to-peer Payments and speaking of defy the demand For defy comes from Leverage in the form Of crypto-backed loans the demand for Crypto-backed loans declines when crypto Prices decline this would easily explain Usdc's decline if it wasn't inconsistent With crypto's recent price action crypto Prices have risen not Fallen So this relates to the third stablecoin And that's paxos's busd busd is so Called because it finances native Stablecoin albeit issued by paxos as I Mentioned in the introduction busd's Market cap has also been falling fast

Even faster than usdc's in percentage Terms this is simply because paxos has Faced regulatory scrutiny from U.S Authorities and was even ordered to stop Issuing busd as you can see busd's Market cap fell off a cliff in Mid-February when reports first started Coming out about the order to stop Issuing it to be clear busd can still be Redeemed for real USD at paxos until at Least February 2024. it seems that busd Holders got the memo it's been all Redemptions since then Busd's demand drivers are a combination Of usdt and usdcs it's heavily used in Both trading and D5 caveat is that Almost all of busd trading takes place On binance and almost all of busd's defy Takes place on the BNB chain note that The BNB chain was originally created by Binance Not surprisingly almost all the busd in Circulation is held by binance wallets As you can see even the busd on the BNB Chain is held in a wallet controlled by Binance in fact the busd on the BNB Chain was allegedly insufficiently Backed at some point in time hence the Regulatory scrutiny and if that wasn't Crazy enough usdc issue a circle Reportedly blew the whistle about this Occasionally insufficient backing this Could be revenge for the fact that Binance had converted all other stable

Coins except usdt into busd on its Exchange a few months previously Stablecoin competition is intense anyway Speculation aside the inability for Paxos users to Mint any additional busd Theoretically means that it could be Pushed above its dollar Peg with enough Demand now this is unlikely to happen in Practice because of the regulatory Scrutiny around busd and the Availability of of other stable coins Facing less scrutiny what everyone is Wondering now is what happens to the Remaining 5 billion or so busd in Circulation and how it could impact the Crypto Market this all depends on who is Still holding busd and what they plan on Doing with it it's hard to say for sure But it looks like binance itself is the Biggest busd holder in the months after Paxos was ordered to stop issuing busd Finance CEO Chang Peng Xiao announced Multiple conversions of busd into other Stable coins and even into regular Cryptocurrencies it's likely that the Regular crypto conversions have been Supporting crypto prices assuming They've continued of course however it Seems that there's a limit to how much Busd binance can redeem that's because Redeeming all the busd would likely do Damage to bnb's defy ecosystem it seems That this is inevitable though recall That all busd will have to be Redeemed

By some future date likely early next Year as with all the other stablecoin Issuers a continued decline in busd will Also do damage to paxos which had likely Been earning a pretty penny on busd's Pristine collateral for reference paxos Reserve attestations are as high quality As circles the key difference is that Paxos has been audited before now the Good news is that paxos has another Stable coin called usdp that isn't Facing regulatory scrutiny the bad news Is that paxos facing regulatory scrutiny Because of busd makes usdp similarly Unappealing never mind that paxos has Been served a Wells notice by the SEC a Crackdown could come at any time as for Binance it's unclear if a continued Decline in busd's Supply would have any Effect on the exchange this all depends On whether binance also relies on busd's Reserves for Revenue it's scary to Consider the possible ability that Binance has been using busd as a de Facto USD bank account For what it's worth a continued decline In busd's market cap is unlikely to have Any direct effect on the crypto market Binance paxos and BNB seem to be the Only crypto companies and projects that Will be affected and it may not affect Binance at all besides binance has a Plan B when it comes to stable coins This brings me to the fourth and final

Stable coin and that's archblocks TUSD If you've never heard of TUSD before That's probably because its market cap Was very small until fairly recently As you can see tusd's market cap has Been pumping and dumping for about three Years and it recently doubled in size This might have something to do with the Fact that TUSD was purchased from Archblock by an Asian Consortium called Tektarix which reportedly has close Connections to Tron One of archblock's Executives specified In an interview that archblock merely Quote manages TUSD on their behalf Oddly enough tusd's market cap only Started to grow around the time that it Was purchased by tektorix what's bizarre Is that TUSD has reportedly been minted And burned far more than the largest Stable coins despite being a fraction of The size its market cap also doesn't Mirror crypto prices the only market cap Change that makes sense was the recent Doubling this was likely due to the fact That binance started converting lots of Its busd into TUSD after the former was Restricted by Regulators binance also Started offering zero fee trading pairs Against TUSD increasing organic demand Via trading naturally most of the TUSD In circulation is on the Tron blockchain With the remainder being mostly on Ethereum in both cases binance is the

Biggest holder Tekterx was reportedly given control of The private Keys controlling TUSD in Early May and the Consortium is believed To be based in Singapore if you thought That was crazy consider this archblog Which is based in the US reportedly Moved 1.4 billion dollars of the assets Backing TUSD to Capital Union Bank in March the bank used by tether this Coincidentally corresponds to the Roughly 1.4 billion TUSD held by binance On Tron and ethereum what's even crazier Is that archblog then known as trust Token partnered with binance in 2019 to Allow for in-exchange TUSD minting and Burning so taken together these facts Suggest that binance had been keeping TUSD as a plan B in case something Happened to busd which was issued in 2019. what's more is that archblock Seems to be the only stablecoin issue But besides paxos that's been audited Archblock was audited around the time it Partnered with binance earlier this year Archblock partnered with chain link for Real-time proof of reserves something That was also being done by big Exchanges more about proof of reserves In the description moving on Now regarding tusd's reserves it appears That archblock stopped doing Attestations in 2020 around the time That it sold TUSD to techtorix real-time

Proof of reserves can still be found on The TUSD website but it doesn't specify What assets are backing TUSD nor where These reserves are being kept Once Upon a Time tusd's real-time Reserves included a breakdown of all the Financial institutions where these Reserves were being kept this was Reportedly removed after signature Banks Started experiencing issues art block Had been holding over 800 million Dollars with the bank before it went Under as it so happens tether had also Reportedly been using Signature Bank for Its Signet system which as you might Have guessed is a 24 7 payment system Required for stablecoin minting and Burning signature's exposure to crypto Clients like archblock and tether could Have been why it was shut down by Regulators more about that in the Description I digress Now in case it wasn't clear enough it Appears that TUSD will assume a similar Profile to usdt meaning that its primary Demand driver will be crypto trading It's also clear that binance has been Supporting TUSD and it's possible that The end game is to grow it to the point That it overtakes usdt take a second to Consider that binance had said that it Was considering converting usdt to busd Last September just like all the other Stable coins if this is still the end

Game then we could see some conflict Between the two biggest players in the Crypto industry it's possible this Conflict has already begun And that's all for today's video folks So if you found it informative be sure To smash that like button to let me know And don't forget to subscribe to the Channel and ping that notification Bell Before you go And if you know anyone who needs to see This video consider sharing it with them Pronto if you happen to be looking for a Safe place to store your crypto or a Trustworthy exchange to trade check out The coin Bureau deals page we've got Discounts of over 50 and exchange Bonuses of up to forty thousand dollars Exclusively for coin Bureau viewers link Will be in the description as always Thank you for watching and I'll see you Next time Foreign [Music]


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