Why Tether (USDT) and TrueUSD (TUSD) whales are key for crypto bull rally?

The collapse in United States banks in 2023 put a massive strain on the risk-on markets like cryptos and stocks. This caused a momentary spike in selling pressure due to panic, which caused the markets to tank. Judging by the current state, recovery crypto markets seem to be going well as compared to stocks and the credit for this goes to the stablecoin ecosystem.

Also Read: Silicon Valley Bank and Signature Bank hearing to be held on March 29, FDIC Chairman set to witness

Banking mayhem and crypto stablecoins

As recapped in a previously published article, the crisis began with the US Securities and Exchange Commission (SEC) going after stablecoin issuer Paxos. The simultaneous collapse of US banks caused markets to tumble. But a few things are inherently different in crypto markets, i.e., the stablecoin ecosystem. 

The $134 billion ecosystem is situated not just in the US but across the globe, making the short-term collapse in the US banking system localized to only a few stablecoin issuers. Tether, the largest stablecoin issuer by market capitalization, and a few others like True USD (TUSD) showed no depeg, while others like USD Coin (USDC), Dai (DAI), Frax (FRAX) etc., saw the coins move away from their $1 peg.

On-chain analysis reveals that the comeback seems to be fueled by two major stablecoins - USDT and TUSD. Tether added $2 billion worth of tokens last week, which was minted but not issued. 

Read More: Tether minted $2 billion worth of stablecoins last week

Likewise, Binance, one of the largest crypto exchanges in the world by trading volume, converted $1 billion of its SAFU Funds into TUSD AND USDT, signaling that these stablecoins are, at the moment, safe.

Read More: Binance removes BUSD from its $1 billion SAFU Fund, swaps it with USDT and TUSD

Stablecoin whales fueled the March rally

The Supply Distribution chart for USDT and TUSD shows a similar trend, accumulation from whales holding between 100,000 and 10,000,000 coins. 

The number of Tether whales holding 100k and 10 million USDT saw a massive spike, denoting that more investors are converting their stablecoins to USDT. 

More specifically, USDT whales with addresses holding between 100k and 1 million saw a spike from 13% to 15% between March 9 and March 18. The addresses holding between 1 million and 10 million USDT increased from 20% to 22%. 

All of the signal points to the fact that these whales are ready with gunpowder to accumulate cryptos and trigger a run-up. 

For TUSD, whales holding between 100k and 1 million tokens increased from 44 million to 50 million. 

Supply Distribution chart

While the outlook of the entire market has flipped bullish after Bitcoin price tagged $27,000, investors are still cautious due to the troubling macroeconomic conditions. The bullish outlook is still uncertain, especially if the banking crisis gets worse. 

If the policy changes from the Federal Reserve gets hawkish, it could trigger a rally for the US Dollar, putting pressure on the risk-on assets and driving them to the ground.