Tether loses $4.6 billion in exchange holdings as rivals gain via incentive deals

USDC and RLUSD surge on derivative platforms, while USDT retains dominant payments share

By LineZotpaper

Published20 October 2026

Read Time3 min

Tether's USDT stablecoin lost $4.6 billion in supply across 19 major cryptocurrency exchanges and lenders during the third quarter of 2026, as rivals including Circle's USDC and Ripple's RLUSD gained ground through incentive programs that reward platforms and customers for holding their tokens.

The shift reflects growing competition for stablecoin distribution, particularly on derivatives exchanges where tokens serve as collateral. According to Crystal Intelligence, Bybit recorded the largest reduction, shedding $1.66 billion in USDT while adding $315 million of RLUSD. Binance cut $987 million in USDT and added $223 million in USDC, while OKX reduced by $899 million and added $273 million in USDC.

Meanwhile, the 19 institutions added approximately $1.9 billion in competing tokens, including $569 million of USDC and $493 million of RLUSD. Across the wider market, USDT's circulating supply fell $647 million, or 0.4%, to around $184 billion. RLUSD rose 59% to $2.5 billion, while USDC gained $687 million.

Derivatives platforms have become key battlegrounds. Hyperliquid, a leading derivative exchange, increased USDC deposits by $1.5 billion to approximately $7.2 billion under an arrangement with Coinbase and Circle that shares reserve-linked income. About three-quarters of that quarterly increase came from one cluster of linked wallets, Crystal found.

Deribit, owned by Coinbase, added $365 million in USDC and expanded its rewards program to approximately 70 additional countries in August, paying customers monthly based on minimum daily USDC holdings. Bybit's RLUSD increase followed a rewards campaign launched with Ripple in July.

The competition is costly for issuers. Circle generated about $1.4 billion in revenue in the first half of 2026 but spent $819 million (59%) on distribution and transaction costs and $473 million on operating expenses, leaving a net profit of $103 million -- just seven cents per revenue dollar. Circle expanded distribution through a five-year agreement with Binance that included a $100 million investment from the exchange.

Other issuers are adopting similar revenue-sharing models. PayPal-backed PYUSD offers a 4.5% incentive on up to $1 billion in deposits through USD.AI, while Stripe-owned Bridge launched Open USD in September with a model designed to return most reserve income to partners.

Despite losing exchange holdings, USDT retains dominance in payments. A separate Allium report estimated stablecoins processed $482 billion in classified payments from January to September 2026, with USDT accounting for 84% -- approximately $405 billion. Payment value rose 45% year-on-year, and transaction counts climbed 71% to 1.04 billion, with the average payment declining from $544 to $462. September recorded $72 billion in payments, the highest monthly total. The Tron blockchain handled about two-thirds of classified payment value, preserving a major distribution network for USDT.

Analysis

Why This Matters

The shift from USDT to USDC and RLUSD on exchanges could reduce Tether's network effects and influence over trading liquidity.
Incentive programs are compressing stablecoin issuers' margins, as seen in Circle's thin net profit of seven cents per revenue dollar.
Derivatives platforms are emerging as powerful gatekeepers, extracting a larger share of reserve income from issuers.

Background

Stablecoins are digital tokens pegged to fiat currency, primarily US dollars, used for trading, payments, and collateral. Tether's USDT has long dominated the market, but competition has intensified as Circle's USDC and Ripple's RLUSD gain exchange listings through commercial agreements that share reserve income or offer direct rewards. Regulators globally have increased scrutiny of stablecoin reserves and operations.

Key Perspectives

Tether (USDT): Maintains a commanding 84% share of stablecoin payments ($405 billion) and still holds roughly two-thirds of tracked exchange stablecoin holdings. Its reduction on exchanges may be offset by off-exchange and over-the-counter usage.
Rivals (USDC, RLUSD): Gaining exchange deposits through revenue-sharing and rewards programs, but face high distribution costs that erode profitability.
Exchanges and Platforms: Increasingly able to negotiate favorable terms, earning income from stablecoin reserves while charging trading fees. They benefit directly from the competition between issuers.

What to Watch

Whether Tether responds with its own incentive programs or partnerships to defend exchange market share.
Regulatory developments in the US, EU (MiCA) and elsewhere that could alter stablecoin issuance requirements and distribution costs.
The pace of stablecoin payment adoption outside exchanges, where USDT currently leads, and whether rival issuers can break into that market.

Sources

Tether loses nearly $5 billion across crypto exchanges as USDC and RLUSD rivals pay to win liquidity · CryptoSlate

Checked

12 claims in this story checked against 1 source: 12 supported.

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SupportedTether loses $4.6 billion in exchange holdings as rivals gain via incentive dealsCryptoSlate: “Tether lost $4.6 billion in USDT supply across 19 selected cryptocurrency exchanges and lenders during the third quarter”
SupportedUSDC and RLUSD surge on derivative platforms, while USDT retains dominant payments shareCryptoSlate: “USDT maintained a commanding position in stablecoin payments... USDC and RLUSD gained ground on derivatives platforms”
SupportedTether's USDT stablecoin lost $4.6 billion in supply across 19 major cryptocurrency exchanges and lenders during the third quarter of 2026CryptoSlate: “Tether lost $4.6 billion in USDT supply across 19 selected cryptocurrency exchanges and lenders during the third quarter”
SupportedBybit recorded the largest reduction, shedding $1.66 billion in USDT while adding $315 million of RLUSDCryptoSlate: “Bybit recorded the largest reduction, shedding $1.66 billion in USDT while adding $315 million of RLUSD”
SupportedBinance cut $987 million in USDT and added $223 million in USDCCryptoSlate: “Binance reduced its Tether holdings by $987 million and acquired $223 million of USDC”
SupportedOKX reduced by $899 million and added $273 million in USDCCryptoSlate: “OKX cut $899 million in USDT and added $273 million of USDC”
SupportedThe 19 institutions added approximately $1.9 billion in competing tokens, including $569 million of USDC and $493 million of RLUSDCryptoSlate: “the 19 institutions added approximately $1.9 billion in competing tokens, including $569 million of Circle's USDC and $493 million of Ripple's RLUSD”
SupportedUSDT's circulating supply fell $647 million, or 0.4%, to around $184 billionCryptoSlate: “USDT's circulating supply fell $647 million, or 0.4%, to about $184 billion”
SupportedRLUSD rose 59% to $2.5 billion, while USDC gained $687 millionCryptoSlate: “RLUSD rose 59% to $2.5 billion, while USDC gained $687 million”
SupportedHyperliquid increased USDC deposits by $1.5 billion to approximately $7.2 billion under an arrangement with Coinbase and Circle that shares reserve-linked income; about three-quarters of that quarterly increase came from one cluster of linked walletsCryptoSlate: “Hyperliquid recorded a $1.5 billion increase in USDC deposits during the quarter, bringing its holdings to approximately $7.2 billion... Crystal found that approximately three-quarters of the platform's quarterly USDC increase came from one cluster of linked wallets”
SupportedCircle generated about $1.4 billion in revenue in the first half of 2026 but spent $819 million (59%) on distribution and transaction costs and $473 million on operating expenses, leaving a net profit of $103 million -- just seven cents per revenue dollarCryptoSlate: “Circle generated about $1.4 billion in revenue in the first half of 2026 but spent $819 million, or 59% of that amount, on distribution and transaction costs. Another $473 million went to operating expenses and network investment, leaving Circle with about $103 million in net profit, or just seven cents of every revenue dollar”
SupportedStablecoins processed $482 billion in classified payments from January to September 2026, with USDT accounting for 84% -- approximately $405 billion; payment value rose 45% year-on-year, transaction counts climbed 71% to 1.04 billion, average payment declined from $544 to $462; September recorded $72 billion in payments, the highest monthly total; Tron handled about two-thirds of classified payment valueCryptoSlate: “Allium estimated that stablecoins processed $482 billion in classified payments between January and September, with USDT accounting for 84% of the total... payment value increased 45%... transaction counts climbed 71% to 1.04 billion... average payment declined from $544 to $462... September recorded $72 billion in payments, the highest monthly total... The Tron blockchain processed approximately two-thirds of classified payment value”