The banking sector could potentially undergo a much-needed revamp, but until then, investors appear to be scrambling for a safety net. As the traditional financial world is rocked by the Credit Suisse chaos and the failure of a series of US banks, investors have flocked to the largest stablecoin, Tether (USDT).

The turmoil has once again helped the controversial asset extend its lead.

Tether Market Cap

Silicon Valley Bank (SVB), Signature Bank, and Silvergate Capital, once served as a vital tripartite of lenders fetching deposits from crypto companies, all collapsed this year in a relatively short span of time. The demise of these entities highlighted the “un-stableness” of stablecoins.

The fintech firm Circle admitted a $3.3 billion exposure to SVB, which briefly dragged its USDC token to 88 cents instead of its usual one-dollar price. The token has regained its peg, thanks to the lifeline provided by the US regulators as they moved to ensure that the deposits in Silicon Valley were safe while Circle promised financial support.

USDC is the second-largest stablecoin and is also widely used in decentralized finance (DeFi). While the latest turns of events did not transpire into a Terra-like catastrophe, the threat was massive, and this has further aggravated the stablecoin crisis. This has resulted in USDC’s market cap falling by nearly 21% so far this year.

A similar trend was seen in Binance USD (BUSD) as well, which had its fair share of setbacks with the regulatory agencies in the US this year. BUSD’s market cap declined by more than half to just over $8 billion.

Tether’s market cap, on the other hand, has reached levels last seen in May 2022. In fact, USDT has continued to follow a steady upward trajectory since the massive drop that month and even managed to surge past $77 billion. It was up by over 17% year-to-date as traders are relying on the asset more than ever.

Safety Net?

The sentiment in stablecoins has taken a sharp reversal from last year when investors spooked by the Terra crash rushed to redeem billions of tether and switch to USDC. This time around, however, USDT has emerged as the in