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Tether (USDT) Dethrones Ripple (XRP)
Bitcoin has held the spot for most valuable cryptocurrency for as long as it has been traded. But what about the number two, or number three spots? Well in 2015, Ethereum had a monumental rise to power, capturing and securing the title of second most valuable cryptocurrency. Every other spot has been highly contended and will often shift multiple times throughout the weeks. One shift in particular, is worth paying attention to. Tether, or USDT has just dethroned Ripple, which has held the number three position for years. This flip in ranking has deeper meaning. Let us explore.
The Flippening
Around the time that Ethereum was steam rolling over every other cryptocurrency, including bitcoin, a new term was coined. The Flippening refers to the event where Ethereum would overtake the market capitalization of bitcoin. It has since been used to refer to other significant overtakings on the coinmarketcap ranking system. The top tier cryptocurrencies are typically firm in their positions, especially bitcoin. No coin has ever dethroned bitcoin as the king of crypto. Ethereum however, was briefly overtaken by Ripple in 2018 during an aggressive selloff of most cryptocurrencies.
USDT Solves Ripples Problems
Brad Garlinghouse, the CEO of Ripple Labs has been quoted saying that the purpose of Ripple is to facilitate cross border payments. While this is all well and good, it appears that other cryptocurrencies are doing a better job of this than Ripple is. The main concern is the value of XRP dropping between when the money is sent and received. Because Ripple is a classic cryptocurrency, and not pegged to a government currency, its value may fluctuate heavily on a day to day basis. Tether on the other hand, is a stablecoin, and floats around 1.00 USD per USDT. This makes Tether an ideal cryptocurrency not only for cross border payments, but everyday purchases in general.
In this way, USDT solves at least two problems that Ripple has. The first problem is stability. Although some cryptocurrency buffs will tell you that USDT is not a true cryptocurrency, it does still inherit some of the properties. USDT is able to be transferred across borders, near instantly, for very cheap. Most people don’t care whether or not this is called a cryptocurrency or not. It still received all the benefits that most other cryptocurrencies also enjoy. The second problem is acceptance as currency. There is not as much of a mental leap to make in order to understand USDT. It’s a cryptocurrency that is equal in value to a USD. Ripple on the other hand requires users to have a much broader understanding of cryptocurrency.
If money is a belief system, then USDT inherits the underlying trust and belief in the USD. Ripple, like other cryptocurrencies need to build this trust and recognition from scratch. To this day, bitcoin is really the only cryptocurrency that has received anything close to recognition as a currency, outside of the crypto community.
The Liquidity of Assets
Liquidity is the ability for an individual to exchange one asset for another, at the desired price. I am only able to sell one-million dollars worth of bitcoin at 10k USD a piece, if there are enough people willing to buy at that price. Slippage is a term in finance that refers to the loss in value of your assets, when doing an exchange. If there is not enough liquidity for my one million dollar exchange of bitcoin, then I am forced to sell some of my bitcoin at a lower price, resulting in me having less money. This loss is called slippage. USDT has proven itself as a highly liquid, safe, and efficient way of moving money. Exactly what Ripple wishes it was. The dethroning of Ripple indicates not just a shift in market capitalization, but also a shift in belief.
