Tether, the world’s largest stablecoin, lost $2 billion from its market capitalization in December, amid challenges caused by the European Union’s new Markets in Crypto Assets (MiCA) regulation.
The MiCA regulatory framework will come into full effect from December 30, 2024.
Exchange Removes USDT Listing Before MiCA
MiCA regulation requires stablecoin issuers to have certain licenses to operate in the European Union. Apparently Tether has failed to meet MiCA’s strict requirements, which could jeopardize its future in the region.
As a result, European exchanges have begun delisting Tether’s USDT stablecoin in anticipation of the anticipated regulatory crackdown.
According to CoinMarkCap, USDT’s market capitalization fell from $140.5 billion to $138 billion over the past week, marking the largest drop in a year of continuous growth.
USDT, which is pegged to the US USD at a one-to-one ratio, was trading at $0.997 at press time, the lowest in two years for the stablecoin.
USDT Volatility: Is There Reason to Panic?
It seems there is a lot of fear, uncertainty and skepticism (FUD) gripping the market regarding the legality of USDT in Europe now that the MiCA regulation is in place.
However, it should be noted that holding USDT is not considered a violation of the law under the new regulations. USDT can be stored in wallets not held by others and even traded on decentralized exchanges.
The problem is that traders cannot use USDT on MiCA-compliant exchanges.
Cryptocurrency expert Axel Bitblaze even suggestion that the removal in the EU will not materially affect USDT. This expert pointed out that 80% of USDT trading volume originates from Asia, minimizing the shock in the EU.
This is also clearly demonstrated when USDT only lost 1.4% of market capitalization despite intense FUD. USDT also continues to record higher trading volumes than all top 10 cryptocurrencies combined.
What’s more, Tether has been preparing for the regulatory crackdown by scaling back its EU operations and investments in MiCA-compliant stablecoins.
FUD Criticism Expert
Tether has faced similar FUDs in the past. For example, in 2022, FTX’s bankruptcy caused USDT to lose its anchor and fall to $0.93. This news comes after BTC fell below $16,000 and traders sold off altcoins in panic. However, two years later, Bitcoin surpassed the long-awaited $100,000 mark.
Recently, in October, the Wall Street Journal reported that the US government is investigating Tether for sanctions violations and money laundering. This caused panic in the market, causing Bitcoin to drop $2,000 soon after.
When the allegations were cleared up by the Tether Commander, the market began to recover. Bitblaze expert Axel believes that the FUD surrounding Tether should be seen as a buying opportunity, given the examples above.
“Interestingly, you usually only hear this FUD at the pico bottom or while the market is peaking. Do one thing, take a snapshot of crypto prices today and wait until February/March 2025; you will see the majority of them trading much higher than current levels. Not only that, USDT will still be the #1 stablecoin, and people will continue to call it the end, which they have been saying for the past 7 years,” he said.
Blockchain CEO Samson Mow also expressed the same opinion when he said,
“The time to FUD Tether is probably when it has under $100 million in assets under management. Now, with USDt reaching $143 billion in assets under management, it is one of the 20 largest institutional holders of US government bonds (more than all but 18 countries), backed by Cantor Fitzgerald (with The CEO is the future Secretary of Commerce of the United States), has a trading volume 16 times that of its closest competitor (USDC), and serves several hundred million users in the Southern countries… You or is no information (Jason lol) or have a plan,” Mow raised.
