Tether and Circle add $1.3bn in a single day as Ether ETF odds improve

New stablecoins are being minted at a rapid pace in 2024.

Nearly $30 billion have been minted so far this year, with a surge on Tuesday, presumably because of the increased odds that the Securities and Exchange Commission will approve spot Ethereum exchange-traded funds on Thursday.

The two largest stablecoin issuers, Tether and Circle, minted $1.25 billion in stablecoins on Tuesday. Tether minted $1 billion USDT on Ethereum, and Circle minted $250 million USDC on Solana.

Generally, increases in the stablecoin supply are a bullish indicator, because traders use stablecoins to purchase other cryptocurrencies.

Now, large amounts of stablecoins may be used to buy Ethereum in an attempt to front-run traditional investors, especially given the spot Bitcoin ETFs attracted nearly $16 billion in investments since their launch in March.

The process

This bullishness is explained by the process through which Tether and Circle issue new stablecoins.

For both entities, minting begins with a know-your-customer, or KYC, process, which includes standard identification checks and sanctions screenings. Additional documents may also be requested as needed.

Tether allows anyone who passes the KYC check to mint USDT, including individual traders, while Circle permits only registered businesses to mint USDC at scale.

After passing a KYC check, users can deposit fiat currency into Tether or Circle bank accounts. The funds are held in reserve to ensure each stablecoin is backed by at least $1 of fiat currency or cash equivalents.

Tether’s reserves can be monitored here, and Circle’s reserves can be monitored here.

Once funds are deposited, the stablecoin issuer confirms the validity of the deposit and issues the stablecoins to the provided wallet address.

To withdraw funds, users send USDT or USDC to the respective issuer.

The issuer then removes the stablecoins from circulation and transfers the equivalent USD amount from its reserves to the user’s bank account.

Demand for crypto

An increase in minted stablecoins indicates higher demand for crypto exposure, and a decrease suggests reduced demand.

With USDT, newly issued tokens can be “authorised but not issued,” meaning they aren’t included in the total market capitalization.

This method batches mints together, reducing security risks by minimising the number of interactions Tether needs with the minting smart contracts.

For example, although Tether issued $1 billion USDT on Tuesday, according to Tether’s transparency page, $997 million USDT is considered authorised but not issued on Ethereum.

Tether’s USDT is the largest stablecoin, with a market capitalization of $111.3 billion while Circle’s USDC is the second-largest stablecoin, with a market capitalisation of $32.7 billion.

Both stablecoins can be used on more than 70 different blockchains.

Overall, stablecoin minting has ramped up in 2024, as the total market capitalisation has risen to $160.6 billion from $130.8 billion at the start of the year.

That has coincided with an overall increase in crypto prices, as the total market capitalisation for all cryptocurrencies has risen to $2.7 trillion from $1.8 trillion at the start of the year.

Ryan Celaj is a data correspondent at DL News. Got a tip? Email him at ryan@dlnews.com.