Tether's Dominance: A Misleading Measure of Crypto Volume

The crypto market's volume rankings may be misleading due to the way stablecoins are traded. Open any market dashboard and sort by 24-hour volume, and you'll likely see Tether (USDT) at the top, often by a wide margin. A recent reading showed roughly $31.4 billion of USDT changing hands against $20.3 billion of Bitcoin, with USD Coin (USDC) third at $7.87 billion.

The reason for this is that stablecoins are not assets people buy; they're the currency people use to buy other assets. In traditional markets, volume is measured in shares, and the dollars used to purchase them are just a medium of exchange. However, in crypto, every USDT that passes through a trade gets counted as USDT volume, so the medium of exchange shows up alongside the things it's used to purchase.

This means most of USDT's volume is not a measure of demand for Tether itself but rather activity in other assets. Four mechanics inflate volume figures: the same dollar gets counted multiple times, bots execute hundreds of transfers a day, exchanges want to look busy, and wash trading contributes to headline figures.

Adjusted volume, which strips out bot traffic and internal exchange transfers, provides a more accurate picture. According to Visa's onchain analytics dashboard, adjusted stablecoin transaction volume totaled roughly $8.82 trillion through the first half of 2022, with a single record month near $1.79 trillion in June.