USDT market share jumps amid economic uncertainty, USDC shrinks

Would You like a feature Interview?

All Interviews are 100% FREE of Charge

The market dominance of USD-pegged stablecoins has undergone several changes over the past year. CoinGecko Data Shows Tether (USDT) Has Returned To All-Time Highs While Most Of Them Are In A Downtrend show.

Over the past 12 months, Circle’s USD Coin (USDC) market share has decreased from 34.88% to 23.05% at the time of writing. Binance USD (BUSD)’s market participation rate plummeted from 11.68% to 4.18% over the same period, while Dai (DAI) maintained its participation rate at 3.66%, down from 4.05% in May 2022.

Tether’s USDT has followed a contrasting trend. Stablecoin market dominance is now at 65.89%, up from 47.04% a year ago. Market cap surged to $83.1 billion, while USDC’s market cap fell to $29 billion from its peak of $55 billion.

In a recent interview with Bloomberg, Circle CEO Jeremy Allaire attributed the decline in stablecoin market capitalization to the crackdown on cryptocurrencies by U.S. regulators. The current environment in the US appears to favor Tether.

U.S. banking crisis led to USDC pegging in March as $3.3 billion worth of reserves piled up at Silicon Valley Bank, one of three crypto-friendly banks shut down by regulators rice field. Despite Circle’s assurances, the market reacted quickly to the news, unpegging the USDC from the dollar.

Stablecoins are growing in popularity as the crypto space becomes more connected to traditional finance. A recent report by the European Systemic Risk Committee highlights the need for greater transparency in digital asset markets, especially stablecoin reserves.

Tether has been heavily criticized for its lack of transparency in recent years. The Hong Kong-based iFinex-owned cryptocurrency firm was fined $18.5 million in 2021 by the New York Attorney General’s office for allegedly misrepresenting the fiat currency backing its reserves. As part of the settlement, stablecoin issuers were also asked to increase their financial transparency.

Tether’s leadership fought He responded to negative allegations on Twitter. Additionally, the company is looking to reduce its exposure to the banking system following the failure of Silicon Valley Bank. According to its latest audit report, Tether withdrew more than $4.5 billion from banks in the first quarter of 2023, leading to a “significant reduction” in counterparty risk amid continued global economic uncertainty.

The company also raised its U.S. Treasury Bills to a new high of more than $53 billion, or 64% of its reserves. Combined with other assets, USDT is currently backed by 85% of cash, cash equivalents and short-term deposits, according to the report.

Circle is making similar moves. The stablecoin operator has reportedly adjusted its reserves to mitigate risk in the face of macroeconomic uncertainty and no longer holds maturing US Treasuries since early June.

Magazine: Crypto Regulation — Does SEC Chairman Gary Gensler Have the Final Decision?