Tether's "market dominance" status is stronger
Cryptocurrency investors are fleeing U.S. payments firm Circle's U.S. dollar stablecoin USDSDC , with many turning to Tether (USDT), pushing USDT's market share to a 22-month high.
Since regulators shut down Circle’s main reserve bank partner, Silicon , USDC has seen net outflows of more than $10 billion. Although Circle survived the collapse of Silicon Valley Bank, because USDC once lost its 1: 1 peg to the US dollar after the collapse of Silicon Valley Bank, its market value fell sharply by 23% from its previous peak of US$43 billion.
USDC’s plunge in market value comes as the stablecoin industry is being severely tested . Binance’s stablecoin, BUSD, has suffered as well as other stablecoins.
So far, USDC remains the second largest stablecoin in the world with a market capitalization of $33 billion. Circle backs USDC's value by investing in short-term government bonds managed by money management giant BlackRock and the cash reserves of several U.S. banks. Circle said it had moved "almost all" of its cash to BNY Mellon, one of the world's largest custodian banks, after the banking system went awry , leaving only "limited funds" with other partners.
Over the past week, investors have redeemed $1.5 billion more USDC than new issuance, including bankrupt cryptocurrency broker Voyager, which also redeemed $150 million on Tuesday. Since USDC has to keep the price at $1, a decrease in token supply means that investors have exchanged USDC tokens for USD. The result is a net outflow of funds.
Enigma Securities, a digital asset brokerage, said earlier this month:
USDC survived this battle, but whether it will be the final winner is still uncertain.
Most investors have apparently fled to Tether's stablecoin USDT, which is the largest stablecoin in the market, taking the lead in reaching its highest level since May 2021.
USDT has always been an important pillar of the cryptocurrency ecosystem and is widely used for transactions between exchanges. Its issuer, Tether, has faced scrutiny for years over reserve assets and a lack of transparency, but investors have apparently become less concerned about those issues recently.
The $132 billion stablecoin market has been in turmoil since February , when New York regulators ordered stablecoin issuer Paxos to stop minting Binance Dollar B USD, the third-largest currency. Stablecoins, the supply of BUSD has now fallen below $8 billion, a "half cut" from $16 billion in early February.
CryptoCompare pointed out in a March report that USDT took advantage of the opportunity during this period. Since March 10, the market value of USDT has swelled by approximately US$8 billion to US$79.5 billion, with a market share of 60%, the highest level since May 2021.
Circle CEO Jeremy Allaire tweeted last week: "The irony is that those players with the most solid positions in US regulation and integration with the US banking system are considered 'unsafe'. Market participants are turning to unregulated platform, completely opaque banking and risk exposure.”
Paolo Ardoino, chief technology officer of Tether, revealed that USDT has an excess reserve of approximately US$1.6 billion, and the company is expected to make a profit of US$700 million in the first quarter of this year.
Another stablecoin, trueUSD (TUSD), has benefited from it and has become one of the alternatives to BUSD. TUSD's market capitalization has ballooned from less than $1 billion to $2 billion, making it the fifth largest stablecoin.
