Tether Still Dominates Stablecoins Despite Rising Competition — Nansen Report

Despite the rapid emergence of new stablecoin issuers, Tether (USDT) continues to dominate the market with an iron grip. According to a recent report by blockchain analytics firm Nansen, Tether holds a commanding 66% market share among USD-pegged stablecoins, far outpacing competitors like USDC and Ethena’s USDe. But what keeps USDT on top, and can rivals ever close the gap?

Tether’s Unshakable Market Leadership

As of April 25, 2024, Tether’s USDT remains the undisputed leader in the stablecoin sector, controlling approximately 66% of the market. Its closest competitor, Circle’s USDC, holds a 28% share, while Ethena’s USDe lags behind at just over 2%. Nansen’s data highlights Tether’s dominance not just in market capitalization but also in on-chain activity.

Nansen’s report emphasizes that Tether’s dominance is unlikely to fade anytime soon. The firm noted:

“With nearly 3x as many users as Uniswap and 50+% more transactions than the next app, Tether is by and far the largest use case of on-chain activity.”

Why Tether Remains the Preferred Choice

Several factors contribute to Tether’s continued dominance:

• Liquidity: USDT is the most widely accepted stablecoin across exchanges and DeFi platforms.
• Stability: Despite past controversies, USDT has maintained its peg effectively, earning user trust.
• Profitability: Tether’s business model, which involves investing reserve assets in Treasury bills, has generated nearly $14 billion in profits in 2024 alone.

USDC’s Growth and Regulatory Appeal

While Tether leads, Circle’s USDC has been growing at a faster rate since November 2023. Nansen attributes this acceleration to a more favorable regulatory environment in the U.S. following the 2024 elections.

USDC’s appeal lies in its regulatory compliance, making it a preferred choice for institutional investors. However, Nansen warns that USDC now faces increasing competition from traditional financial giants like Fidelity, PayPal, and major banks entering the stablecoin space.

New Entrants Shaking Up the Market

The stablecoin market is no longer just a battle between USDT and USDC. New players are making waves:

• PayPal’s PYUSD: Gaining traction due to PayPal’s vast user base.
• Ripple USD: Positioned as a bridge currency for cross-border payments.
• Stripe’s Upcoming Stablecoin: The payment giant’s acquisition of Bridge signals its ambitions in the sector.

Ethena’s USDe: The Yield-Bearing Challenger

Ethena’s USDe, though small in market share, stands out due to its yield-generating mechanism. Since its launch in 2024, USDe has offered an average annualized yield of approximately 19%, making it attractive for DeFi users.

Nansen notes that USDe’s integrations with centralized exchanges (CEXs) and DeFi protocols enhance its competitiveness. However, its long-term viability depends on sustaining high yields without compromising stability.

Conclusion: A Winner-Takes-Most Market

Nansen’s report concludes that the stablecoin market follows a “winner-takes-most” dynamic, where liquidity and trust outweigh minor advantages like higher yields. Tether’s entrenched position, combined with its profitability and liquidity, makes it difficult for competitors to dethrone USDT.

For investors and traders, the key takeaway is clear: liquidity and stability matter more than marginal gains in yield. As the stablecoin landscape evolves, Tether’s dominance appears secure—at least for now.

What’s next? Keep an eye on regulatory developments and institutional adoption, as these factors could reshape the competitive hierarchy in the coming years.