Erik Weijers, 9 months ago
Is USDT's years of dominance as the leading stablecoin coming to an end? A new indicator points in that direction. For the first time, the transaction volume of main competitor USDC is higher.
According to data from Messari, which aggregates transaction data from the largest crypto exchanges, the trading volume of USDC was double that of USDT on Tuesday, June 21, 2022. Both USDT and USDC are stablecoins backed by dollars or so-called dollar equivalents such as short-duration US government bonds.
USDT (USD Tether) has been the first and leading dollar stablecoin since 2015. The coin is one of the main pillars of the crypto markets. Tether was the first to realize that crypto traders need a currency that is stable against the dollar. This would allow them to put away profits in Bitcoin, for example, without pulling their money from crypto exchanges. Stablecoins also play an important role in Decentralized Finance (DeFi), for example in liquidity pools, where users earn interest on them.
USDC (USD Coin) has emerged as the main challenger to USDT since 2018. USDC is better regarded among investors and regulators. Unlike Tether, the company behind it - Circle - is fully transparent about the dollar reserves that cover their outstanding amount of USDC.
Currently, the total amount of USDT in circulation does still exceed the amount of USDC (67 billion compared to 56 billion). For comparison, in December 2020 it was 20 billion versus 3 billion.
The total market cap for stablecoins (USDT brown, USDC green)
It seems a matter of time until the final 'flippening' is there and USDC also exceeds USDT in market share. Most crypto investors will not be sorry. Ever since its inception, USDT has had hassles with regulators. There is no real satisfactory transparency about USDT's reserves.
That explained why after the market panic surrounding the (then) number 3 stablecoin UST (Terra), there was also a run on USDT. Tether managed to hand out dollars to everyone who asked for them. But due to the temporary lack of confidence, USDT lost the stable price of 1 dollar and even dropped to 94 cents. Since then, this peg has returned to near $1. A crisis that would have been much bigger than the Terra crisis was averted. But by now it is clear that users of USDT are switching to USDC.
Incidentally, Circle recently launched a euro stablecoin and Tether a Mexican peso stablecoin.
Mar 17, 2023
When it became clear that Circle had $3.3 billion stuck at the Silicon Valley Bank the market went wild. USDC lost its peg and was trading way below 1 US-Dollar. Bear market PTSD set in and the broader crypto media was already discussing if USDC would fail. Fortunately, things turned around shortly after the initial turmoil and Circle was made whole again. This has been a big relief for the market but needs some explanation.
Mar 13, 2023
Stablecoin USDC lost its peg of 1 dollar. In the early hours of past Saturday, it even temporarily fell as low as $0.89. The reason is that Silicon Valley Bank (SVB), which held dollars that backed USDC, went under. Only after the American Government made the assurance that SVB depositors will be made whole, USDC recovered to $0.99.
Feb 13, 2023
Crypto brokerage firm Paxos will end its relationship with Binance for the BUSD stablecoin. This spells doom for the world's third largest stablecoin. What are the implications of this development: is this a war on stablecoins?
Nov 10, 2022
In the last couple of days many misconceptions about stablecoins were discussed in the media. The FUD was juicy and the story was told that Tether (USDT) and Circle (USDC) had exposure to FTX and could face serious consequences. None of this is true and while FTX is imploding, stablecoins are not affected.
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