In general I think centralized stablecoins like USDT are a double-edged sword. Personally I use them only to park small amounts for a short time.
The problem is that the stablecoin operators are an additional entity you have to trust, aside from exchanges. I would never hold more than very small USDT amounts on an exchange or centralized wallet, because both Tether and the exchange could go bankrupt.
But there's an additional problem not all stablecoin holders are aware of: Most stablecoins, including USDT, can be blacklisted by the operator. I interpret that if you are unlucky, you could be buying USDT at an exchange, withdraw them, and a few hours, days, or even months later some other entity (e.g. another exchange) discovers that these USDT are connected to a hack or theft. Your coins could thus be frozen and I imagine to "unfreeze" them must be a big hassle (I guess you'll have to KYC and show the origin of the funds).
However, an increase in USDT supply can indicate new money entering the cryptocurrency market. Since USDT is frequently used to buy other cryptocurrencies, this can lead to increased buying pressure, potentially pushing token prices up and contributing to a bullish trend. I think if Tether keeps issuing new USDT, it suggests that there's still demand for stablecoins, which could be a sign that investors are still entering the crypto market and the crypto market is still in an uptrend.
In general, the stablecoin supply tends to grow not only in bull markets, but also in the first phase of the following bear market. See
this chart about USDT supply:
You can see that the long term trend is going up together with the cryptocurrency market cap, but there is a delay compared to the price curve. You see that after 2021's November high, the USDT supply continued to grow until May 2022 (this was when Terra/Luna collapsed) and then retracted. I interpret this in the following way: In the beginning bear market, many will try to cash out, and thus the USDT demand goes up even if the crypto prices themselves are already sinking. So no, I would not trust stablecoin supply as a significant metric "that we are in a bull market".
To your questions:
Is USDT safer than other stablecoins in the market?
I personally think that USDC may be a little bit safer because its operator, Circle, is a regulated US company (and they are going public soon, it seems, which would make USDC even safer). iFinex (USDT operator) instead is located on a known "tax haven" (British Virgin Islands).
Dai is safer in another way because it can't be frozen. It has however other risks, it can depeg easier, and there is also a kind of "emergency shutdown button" which will be activated if something goes wrong.
- Are Tether and USDT really important for the development of the crypto market?
[/list]
I think not, they aren't too important; smaller altcoin exchanges are the only entities benefitting from it because it allows them to offer an USD-pegged value without a "fiat ramp". Specially I think it's bad that the stablecoin market is so concentrated on USDT, because while I think the risk they're collapsing is low, the risk that this collapse would affect the market is high. Take Terra/Luna, which was a small stablecoin but was able to dip the BTC price 30% or even more (we don't know how much of the May 2022 crash was caused directly or indirectly by Terra/Luna).
Could Tether collapse in the future?
I don't think it's as likely as some FUDsters want to make us believe, but it isn't impossible at all.
Thank you for your extremely detailed and interesting comment!
Although I know that Tether can freeze users' accounts, I never thought that I could face that risk. I hope that the USDT that I withdraw from CEXs will always be clean enough and help me feel secure. After all, all USDT on CEXs are the same and Tether cannot freeze all accounts related to a CEX.
I also used to think that USDC was safer than USDT because it is backed by Circle and Coinbase, and behind Coinbase are the giants of Wall Street. However, earlier this year, USD also lost its peg to 26% and caused many USDC holders to suffer heavy losses in the short term @@
I also hope that the stablecoin market will become more decentralized, and Tether will occupy a smaller market share while USDC, FUSD, and DAI will grow more strongly in the future. However, the crypto market is free, and everyone has the right to choose the stablecoin they trust.
I believe that in the short term, Tether will still develop extremely and play an important role in the crypto market. The collapse of Tether, if any, will be a black swan event for the crypto market.
