This is expected. Tether is pegged to $1, BTC is not. In short, higher crypto prices means more tether.
Perpetual futures contracts are also a big part of the market. They are the most common derivatives on crypto assets. It isn't always BTC, but BTC is the biggest asset in the space.
Derivatives in general need to be denominated in something. Tether is the most accessible on exchanges outside the US (e.g. Binance). These contracts settle in the Tether stablecoin, not the contract's underlying. As all crypto asset prices go up, those contracts need to be settled in more Tether.
When one party shorts a derivative, a counter-party needs to long the same derivative. Same thing happens with non-crypto derivatives. In the end, they cancel each other out, but the total amount of Tether would increase as the asset value increases. That money could come from other assets or USD.
On the exchange-side something like this might happen...
party 1 sends USD to Exchange > longs BTC contract > USD collateralizes contract
party 2 sends ETH to Exchange > shorts BTC contarct > ETH collateralizes contract
If ETH drops in value as it relates to USD or party 2's contract expires out of the money, the exchange would likely give party 1 the value of the contract in tether.
Similar misunderstandings happen in the stock market. People will point to the notional value (amount in $) of margin debt, but ignore the total value of the market. Of course, higher debt would be needed to collateralize a more expensive asset (e.g. SPX).
Also, when sending non-USD currencies to an exchange, I would guess the exchange is likely to convert them to Tether, or at least gives the option. I wouldn't want to have YEN in my account as the value sinks when I have a Tether backed contracts. That may be another source of new Tether.
> This is expected. Tether is pegged to $1, BTC is not. In short, higher crypto prices means more tether.
What? Tether is supposedly minted in response to fiat deposits. They accept real dollars and give Tether IOUs in return.
The concern is that Tether minting seems to generate BTC price spikes. The story goes that investors are giving their money to Tether, which gives them Tethers, and then they take the Tethers and buy BTC. Nobody can seem to explain why these people aren’t just giving their money to exchanges and buying BTC without the extra steps, though.
This is all very hand-wavey. Never concrete statements.
The minting happens at the portal (eg Binance). There's no sense for an exchange to mint a liability without collateral.
I gave an example of liquidations resulting in new Tether. I don't know what you count as a spike, but liquidations happen all the time. The exchanges report liquidations publicly. A lot happened recently with BTC's move up. You can also see open interest increase or decrease on liquidations depending on if a short or long position is liquidated. Again, those contracts are settled in Tether, so it would make sense for Tether market cap to increase on asset price increases.
There are also funding requirements at different times. The more people short a contract, the more they pay to their counter-party until they close the position. Same is true for longs. One side or the other are incentivized with higher or lower rates to keep the contract in line with spot price. This is an ongoing cost. It fluctuates throughout the day.
It's a well known signal to watch stablecoin market caps as a ratio of total crypto market cap - (USDC+USDT)/Total. This ratio is currently at the midpoint. Leverage increasing means stablecoin MC increases. Leverage decreasing, means stablecoin MC decreases. It doesn't go down 100%. You will see it trend up.
Even when it was down 77% from its high in Nov. 2021, people were saying this. Still down 64%. Of all the assets in the world Tether could buy with their "IOUs", I don't know why people keep saying they're buying BTC. I don't know where this idea came from, or how it possibly makes sense.
FYI - USDC market cap increased more than USDT in 2022. Where are the "Circle is buying BTC with IOUs" conspiracies?
Look at a tether volume chart vs a btcusd chart