(Bloomberg) -- With most asset classes hurting during the coronavirus pandemic, one cryptocurrency has emerged as the biggest winner in that sector: The token known as Tether.

While crypto bellwether Bitcoin’s market capitalization has shrunk 37% since mid-February, Tether’s increased by 38%, or nearly $2 billion, according to researcher Messari.

For years, Tether’s most well-known version has been promoted as being pegged to the U.S. dollar and as a conduit for doing transactions with little price volatility. That cash-like equivalency of the so-called stablecoin has become even more apparent to crypto investors when the value of most other digital coins tumbled.

“The world has been piling into dollars, and it just so happens that stablecoins are among some of the most unencumbered dollars you can obtain, outside of the financial system,” said Nic Carter, co-founder of crypto market tracker Coin Metrics.

Most of the time, each Tether is roughly equivalent to $1, though the manner of issuance isn’t transparent. The private company incorporated in Hong Kong behind Tether has said that it creates tokens based on customer demand.

Over the past year or so, the company has also started issuing Tethers on a variety of digital ledgers, making it harder for researchers and authorities to track them.

“Anecdotally, some non-U.S. traders have told me that they actually prefer the more lightly surveilled Tether because they feel that it’s less likely that their coins get arbitrarily frozen for violating the terms of service,” Carter said.

Following international and government mandates, many crypto companies updated their terms of service to require users to verify identities. Tether says its users also have to adhere to know-your-customer requirements.

“We can’t predict if the trajectory will remain the same, but the current interest gives us confidence in further steady growth of Tether’s monetary base,” Paolo Ardoino, an executive at Tether-affiliated crypto exchange Bitfinex, said in an email.

Tether and related companies, including Bitfinex, have long lived in the legal cross-hairs. Last year, New York Attorney General Letitia James went after Tether-related companies, claiming they hid a loss of about $800 million of comingled client and corporate funds. Bitfinex has appealed an August ruling ordering the company to face the claim. The companies argued the case in front of an appeals court in Manhattan in early March and are awaiting a ruling from that is likely to come within months.

While Tether claims to be backed by reserves of fiat, those reserves have never been verified in a public audit, and a past legal filing revealed that the coin is only partly backed by cash.

A slew of other stablecoins -- those that also try to barely fluctuate compared with the dollar -- have benefited from Bitcoin’s rout as well, though they remain much smaller in total capitalization. USD Coin, supported by Coinbase Inc. and Circle Internet Financial, has seen demand grow 60% in the past month, according to Circle Chief Executive Officer Jeremy Allaire. Another regulated stablecoin, Paxos, rose as well.

As more investors get into stablecoins, that could increase the cryptocurrency market’s volatility, said Sid Shekhar, co-founder of market tracker TokenAnalyst.

“The more Tether there is in existence (and specifically the more sitting on exchanges), the more there is opportunity for sharp swings in price as traders can immediately buy in (or sell out) as opposed to the slower process of converting sending and fiat into crypto,” Shekhar said. “This naturally lends itself to increased volatility.”

Tether’s growing importance could also dim the prospects of other coins, such as Bitcoin.

The computing networks that support the networks are also paid mostly in Bitcoin or Ether. If everyone is using Tethers instead of the coins they are paid in, fewer computers may be willing to lend their support.

“I’d say what it means is that the dollar is gradually becoming the native currency of some of these public blockchains, to the possible detriment of their ‘native’ currencies,” such as Bitcoin, Carter said. “If native currencies lose their appeal as transactional media and collateral, then the security of these networks may be impaired.”

©2020 Bloomberg L.P.