How Did the Fed’s Rate Cut Trigger Tether’s $5 Billion USDT Surge?

TLDR

• Tether minted $5 billion in USDT in the past week after the Federal Reserve’s interest rate cut.
• The $1 billion minted on Ethereum on September 19 added to the $4 billion issued before the Fed’s meeting.
• The Federal Reserve reduced interest rates by 0.25 percentage points, which is seen as a boost for risk assets like cryptocurrencies.
• Tether’s USDT issuance reflects investor positioning ahead of changing macroeconomic conditions.
• Ethereum now holds 45% of the total USDT circulation, surpassing Tron’s 43.7%.

Tether minted $5 billion in USDT over the past week after the U.S. Federal Reserve’s rate cut. This marked a significant surge in stablecoin issuance, reflecting a response to favorable market conditions. On September 19, Onchain Lens revealed Tether’s minting of another $1 billion on Ethereum.

Tether’s Response to the Fed’s Rate Cut

The Federal Reserve’s decision to reduce interest rates by 0.25%  points on September 17 stirred market reactions. This move is interpreted as a potential catalyst for risk assets, including cryptocurrencies. Stablecoins, such as Tether, typically gain during such periods as they offer liquidity and act as a refuge in volatile markets.

Tether’s latest minting, which began before the Fed’s announcement, underscores investor positioning ahead of shifting macroeconomic conditions. Tether CEO Paolo Ardoino emphasized the accelerated demand for USDT, stating,

The reduction in borrowing costs encourages further adoption of digital assets, contributing to USDT’s increasing circulation.

USDT Holds 59% of $292.6 Billion Market

Tether’s dominance in the stablecoin sector has grown considerably with this recent minting. The new USDT issuance has altered the balance of stablecoin distribution across blockchains. Data from DeFiLlama indicates that Ethereum now hosts 45% of USDT’s total circulation, ahead of Tron’s 43.7%.

This change strengthens Tether’s position in the $292.6 billion stablecoin market. Tether now represents nearly 59% of the market with a supply of $172 billion. According to Ardoino, the growth in USDT holders is significant, with over 3.5 million new wallets holding at least $1 of USDT in the past 90 days.

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