Dominance Tether refers to the liquidity of the Tether cryptocurrency market compared to the whole of total cryptocurrency market in the world.
Tether cryptocurrency is the most important type of stablecoin in the financial market, and this cryptocurrency has a significant impact on the cryptocurrency market.
In the following article, we are going to examine the importance of Dominance Tether as an indicator in the cryptocurrency market adn we will check out together:
- What is Dominance Tether?
- Why should we pay attention to Dominance Tether as an important indicator?
- What is the impact of Tether’s dominance in the cryptocurrency market?
- What are the reasons for the increase or decrease of Tether’s dominance in the crypto market?
- The relationship between Tether dominance and Bitcoin cryptocurrency
What is Dominance Tether?
Tether is the first and most important type of stablecoin that can be implemented on the Ethereum blockchain. Also, the price of Tether is equal to 1 US dollar and its price is always fixed.
Also, since the dominance of a currency means the share of that currency in the entire market. Therefore, Tether dominance means the value of Tether to the total value of the digital currency market.
The market value of Tether cryptocurrency is calculated by multiplying the price of Tether by the number of coins in circulation. Therefore, Tether dominance is the amount of capital that is placed in the stablecoin at any time.
Since the current price of Tether is dependent on the price of the US dollar, it is considered one of the most stable cryptocurrencies in the cryptocurrency market. This increases the popularity of buying Tether digital currency and the volume of its transactions in the market.
Why should we pay attention to Dominance Tether as an important indicator?
Since Tether is the largest stablecoin in the market, it always has a fixed price equal to one dollar, which attracts the attention of traders in the cryptocurrency market when the market falls.
Investors convert their capital such as Bitcoin, Ethereum, etc. to Tether (USDT) digital currency to preserve the value of assets. Therefore, by creating volatility in the crypto market, Tether’s dominance in the market increases.
Also, the increase in the number of circulating Tether tokens indicates a possible change in the performance of large investors in the crypto market.
When traders are converting their capital (Bitcoin, Ethereum, etc.) to Tether digital currency, they are faced with a drop in prices. Because the influx of liquidity into the Tether currency and the outflow of other cryptocurrencies indicates traders’ uncertainty about the future of the crypto market.
For this reason, by converting their capital into Tether, traders want to re-enter the cryptocurrency market while maintaining the value of their assets.
But on the other hand, with the decrease in the value of the Tether cryptocurrency, investors convert their capital (Tether) into Bitcoin or other digital currencies.
Because in this situation, investors predict the future of the digital currency market like Bitcoin to be more profitable. Therefore, these fluctuations in the market become the most important reason for the reduction and increase of Tether’s dominance.
What is the impact of Tether’s dominance in the cryptocurrency market?
The increase or decrease of Tether dominance and other dominances is related to the value of other cryptocurrencies. If investors intend to invest for the long term, they should enter the market when Dominance Tether is low.
Because with the decrease in the price of the Tether currency, investors convert their assets to Bitcoin or other digital currencies and receive more profit due to the prediction of a bright future for the cryptocurrency market.
But in short-term investment, according to the current price of Tether, they should consider Tether’s dominance and enter the cryptocurrency market to make transactions by reducing the Tether’s dominance index.
In general, the dominance of Bitcoin is one of the most important dominances for analysis in the market, but the stability of the price of Tether has caused its great and impressive impact in this market.
What are the reasons for the increase or decrease of Tether’s dominance in the crypto market?
One of the important factors in increasing the current price of Tether is the entry of cash into the cryptocurrency market by investors.
Another main factor in increasing the price of Tether digital currency is the conversion of other cryptocurrencies such as Bitcoin to Tether by traders. Because the dominance of Tether increases when traders make profits by converting other cryptocurrencies to Tether.
Note that the conversion of a currency into Tether digital currency causes capital to exit the market of that currency and capital to enter Tether. Therefore, with the increase in the share of Tether, the dominance rate of that cryptocurrency in the market will also increase.
On the other hand, with the withdrawal of capital from the Tether cryptocurrency market and the conversion of those assets into other digital currencies, Tether’s dominance decreases.
Finally, it will reduce the dominance of Tether currency and increase the dominance rate of the main competitor. Therefore, the most important reason for the decline of Tether’s dominance is the investors’ lack of trust in Tether currency and trust in other digital currencies in the investment market to earn profit.
The relationship between Tether dominance and Bitcoin cryptocurrency
There is an inverse relationship between Tether’s dominance and Bitcoin’s digital currency in the crypto market.
Because dominance is a relative index and means increasing or decreasing the share of a cryptocurrency in the market, the share of other digital currencies will also decrease or increase.
Bitcoin is the most valuable and largest digital currency in the investment market and currently has the most dominance in this market. Therefore, the price of Bitcoin (dominance rate) has also increased in the market and this cryptocurrency occupies a larger share of the total value of the crypto market.
In this case, the share of other digital currencies such as Tether will also decrease in the market. Therefore, according to this issue, there is an inverse relationship between the dominance of Tether and Bitcoin.
Dominance Tether is an indicator that shows the liquidity of the Tether cryptocurrency in the cryptocurrency market compared to the total market value.
The stable price of Tether digital currency compared to the price of Bitcoin or other digital currencies and its price being equal to the US dollar has attracted the attention of many traders in the cryptocurrency market.
Therefore, according to the fluctuations of the market, in order to maintain the value of their assets, investors convert digital currencies such as Bitcoin, etc. into Tether.
Of course, there is also the reverse of this issue, with the decrease in Tether’s dominance rate in the cryptocurrency market, investors have converted their capital from Tether to other digital currencies, including Bitcoin and Ethereum, in order to gain good profits from this large financial market in the future.