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Yesterday, the USDT market capitalization briefly surpassed ETH’s at $184.48 billion, then reached $186.07 billion. The move occurred for the first time in more than 7 years, underscoring the growing importance of the centralized, dollar-backed digital coin amid a major downturn in Ethereum’s fortunes in the broader bear market.
Crypto analytics firm Arkham tweeted regarding this matter:
While Ethereum has recaptured its #2 position today with a slight increase in ETH’s value, the symbolic reshuffling suggests we are headed towards a future with greater significance for USDT and other stablecoins like USDC, all of which are on the rise.
Here is the graph of ETH/USDT from the last 3 months:
Ethereum has been declining in value over the last several quarters, but the capitulation phase has persisted since the start of this month, bringing it to multi-year lows near $1.5k. The second-largest cryptocurrency by market capitalization was sitting comfortably at its all-time high of $4.9k just 9 months ago, and now its value is less than 1/3rd of that milestone.
 
The move shows just how quickly things can go south in the crypto market. While Ethereum’s market capitalization is still struggling to maintain its second-place position, Bitcoin is also experiencing losses. However, its total market value is close to $1.21 trillion and not in danger of being replaced anytime soon.
Will USDT Become the Long-term #2 Cryptocurrency?
The number 2 spot has been held by Ethereum for more than 9 years, and USDT has yet to convincingly surpass it. However, with USDT’s supply being steady and expanding through new issuances, the position could be permanently flipped in the near future.
The stablecoin’s supply is being used for dollar-pegged liquidity in trading and DeFi. At the same time, the demand for Ethereum is weak. Unlike regular cryptocurrencies, stablecoins’ market capitalization depends on the number of coins in circulation, which dwindles due to the minting and burning processes in the Tether Treasury.
The increasing demand for the dollar coin means its supply is likely to grow over time, as more coins are being minted rather than retired. DeFi companies are offering passive staking rewards for USDT deposits at a higher rate than conventional banks, and that is further driving more capital into stablecoins, USDT in particular.
Ethereum, the backbone of decentralized finance and smart contracts with over 120 million addresses and significant total value locked in protocols, continues to face selling pressure. The phrase “cooked” shows extreme frustration with the premier programmable cryptocurrency and its lackluster performance.