The USDC stablecoin from Circle is losing crypto investors, and many of them are transferring to Tether, which has a 22-month high market share.
Since March 10, when authorities shut down Silicon Valley Bank, a significant participant in reserve banking, USDC token net outflows had reached $10 billion. Although USDC has recovered the dollar price peg it lost in the immediate wake of SVB's collapse and U.S. payments company Circle has weathered the crisis, the token has nevertheless lost 23% of its formerly $43 billion market valuation, according to cryptocurrency price tracker CoinGecko.
The sharp decline in USDC occured as the stablecoin market is being put to the test by unpredictability in the banking industry and heightened regulatory scrutiny. Several stablecoins have also fallen, including the BUSD token from Binance.
With a $33 billion market valuation, USDC is still the second-largest stablecoin. Circle backs the value of the token with cash reserves at major U.S. institutions and short-term government bonds managed by investment management behemoth BlackRock.
Beginning on March 10, withdrawals skyrocketed as SVB disintegrated, trapping $3.3 billion in cash reserves in its vaults for days until government intervention. The incident exposed how fiat-backed stablecoins depend on the stability of established financial institutions and threw the stablecoin market into chaos as USDC and smaller stablecoins momentarily lost their price peg.
The amount of USDC redeemed by investors over the previous week has exceeded fresh issuance by $1.5 billion, including the $150 million redemption on Tuesday by the insolvent cryptocurrency broker Voyager. A smaller token supply indicates that investors have traded their USDC tokens for dollars since USDC fixes its price at $1. Net outflows are the outcome.
Enigma Securities wrote earlier this month in a report:
“USDC has survived the battle, but it remains unclear whether it will win the war.”
The largest stablecoin on the market, USDT from Tether, appears to have attracted the majority of investors, increasing its market share to its highest point since May 2021.
A crucial component of the crypto ecosystem's infrastructure, USDT is frequently utilized to speed up trade on exchanges. Although its issuer, Tether, has long been criticized for its reserve assets and lack of transparency, investors now seem to be less concerned about these problems.
After New York authorities ordered stablecoin issuer Paxos to stop producing Binance USD (BUSD), the third-largest stablecoin, in February, the $132 billion stablecoin market has undergone a significant reorganization. Supply of BUSD is now under $8 billion, down from $16 billion at the beginning of February.
CryptoCompare said in its market analysis for March that USDT profited from the decline of BUSD and the decline of USDC.
According to DefiLlama, since March 10, USDT's market value has increased by almost $8 billion to $79.5 billion, giving it a 60% market share among stablecoins. In May 2021, USDT held a share that size for the last time.
Circle Chief Executive Jeremy Allaire tweeted last week saying:
“Ironically, the players who have had the strongest position with U.S. regulation and U.S. banking system integration, are considered ‘unsafe,’ with fears that assets could be stranded. Market participants are shifting into platforms with no oversight, totally opaque bank and risk exposures, and histories of lax financial risk and integrity controls.”
Tether's chief technical officer, Paolo Ardoino, stated in an interview with CNBC that the stablecoin issuer was on track to make $700 million in profits in the first quarter of the year and that USDT had about $1.6 billion in surplus reserves.
TrueUSD (TUSD), another stablecoin, has become more well-known as a result of Binance's promotion of TUSD as one of the BUSD alternatives and increased trade of the currency. TUSD is now the fifth-largest stablecoin, with a market worth of $2 billion, up from less than $1 billion.
