The stablecoin with the largest market cap Tether (USDT)is a very important player for the crypto world. Tether hit its highest level this year, marking a high level of demand. The data could have double implications for the crypto market based on USDT’s role as a trade facilitator and safe haven.
According to data from Santiment, the number of active addresses per day, i.e. unique users trading tokens in a single day, rose to over 83,000 on Thursday and reached 74,000 on Saturday. Thursday’s number marks the highest level in 2022.
The data shows that several different traders have amassed the world’s largest stablecoin. Despite Tether’s limited performance last week, it is positive that users also buy the token. But the increased accumulation of USDT has several implications for the crypto market.
Two of the most prominent of these effects are as follows:
Volatility Started to Increase
USDT is widely used to trade other crypto tokens given its roughly 1:1 constant against the US dollar. Traders often exchange their dollars for the token before using it to trade with other cryptos.
A high amount of accumulation may mean that the market is positioned for more trading action, indicating more volatility in the short term. The surge in USDT trading may eventually spread to other tokens. Santiment also believed that the data indicated more volatility.
“Historically, increasingly active addresses are bullish indicators. A massive spike in one go could be a marker of slightly more volatility. –centiment“
Conversely, however, increased demand for Tether can also mean:
Safe Harbor Search Leads to USDT
USDT’s 1:1 peg against the dollar and large reserves make it a leading safe haven in the crypto space. The token has seen its volumes increase this year, primarily as Russia-Ukraine conflicts increase volatility and push traders to safe havens.
The accumulation of the token may now mean that traders are positioned for more upside in the market and therefore pile into safer areas.
Emotions are quite tense due to the conflicts between Russia and Ukraine and its economic impact. Traders will also have to grapple with rising inflation and hawkish moves from the Federal Reserve this year. The Bitcoin Fear and Greed index is at fear levels and has hovered around that level since February.
All these negative emotions can also be the driving force of Tether demand.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.