March is coming to an end and Bitcoin is looking to end the first quarter of 2020 with 10% losses. These losses will mark the hattrick after recording 25.11% and 10.30% losses in the 3Q19 and 4Q19 respectively.
While the market is ending on a red note, the first quarter went the same way in 2014, 2015, 2016, and 2018.
While Bitcoin is trading around $6,400, Tether Treasury printed about $1.14 billion worth of USDT in March, as per Whale Alert.
All of these freshly minted USDT this month, according to Paolo Ardoino, CTO of Tether and its sister company, Bitfinex, has been “inventory replenishes.”
Interestingly, while the Bitcoin price has been moving in a range, the market cap of USDT jumped over $6 billion last week. This also resulted in the popular stablecoin taking over the third spot from XRP.
This month, while the cryptocurrencies have been recording deep losses, stablecoins have seen a considerable increase in their demand and market capitalization.
Just like traditional investors have been piling into cash for safety because of the liquidity crunch, crypto investors jumped out of cryptos and into fiat-backed stablecoins.
The combined balance of USDT and USDC on exchanges actually surpassed $1 billion in the week following the price crash. The balance of stablecoins on exchange doubled during this time, with 85% of them held by Binance.
“It is a measure of how much money is sitting on the sidelines or placed in limit orders at exchanges, waiting for the perfect moment to buy,” said Ankit Chiplunkar, a research lead at Token Analyst.
According to Sam Bankman-Fried, the CEO of the FTX crypto exchange, much of the new USDT has been printed because of the “huge buy-side demand for USDT.”
The demand for USDT is coming from OTC flows primarily from Asia, and people selling their Bitcoin through USDT to reduce their risk and hedge positions. Also, margin USDT is driving the demand that requires the funds to be parked in USDT.
Throughout this month, USDT also traded above the $1 USD, that could have been used for arbitrage or to buy Bitcoin. All of this demand for the USD pegged stablecoin drove its price up and then supply.
However, there could also be a “troubling” possibility that “some USDT-only exchanges may be running fractional-reserve shops. Now that people are selling crypto for USDT and try to withdraw, exchanges don’t really have that USDT, and need to buy it asap to maintain liquidity,” said Bitfinex Bitcoin whale Joe007.