- The stablecoin landscape has undergone a significant transformation influenced by the United States’ approach.
- Tether’s market share has surged, while Circle’s USDC has declined.
- US policymakers have driven investors towards unregulated alternatives.
The stablecoin landscape has been profoundly transformed by the United States’ rigorous approach to cryptocurrencies. This approach has not only affected crypto exchanges and digital assets. It has also triggered a significant shift within the stablecoin ecosystem, resulting in a notable divergence among the dominant stablecoin issuers.
Tether Soars as USDC Takes a Dive
In the past year, there has been a remarkable surge in Tether’s market share at the expense of Circle’s USDC. Tether’s USDT supply has reached a new peak of 83.36 billion this week, marking a 26% increase since the year’s start.
This surge has firmly established Tether’s dominance, with a commanding market share of 64.5%. On the other hand, the supply of USDC has dwindled to a 22-month low of 28.31 billion, experiencing a substantial decline of 36.4% this year, consequently reducing its market share to 22%.
This divergence can be partly attributed to the actions of U.S. policymakers, who have successfully directed investors away from onshore, regulated stablecoins towards offshore, unregulated alternatives.
USDC Faces Competition as Investors Chase Higher Yields
Once favored by U.S. institutions as a fully regulated company, Circle suffered a loss of confidence due to its association with the now-bankrupt Silicon Valley Bank and the subsequent de-pegging event.
Furthermore, the decrease in USDC usage is linked to a decline in American bank deposits. U.S. citizens now have greater access to higher-yielding investment options such as Treasury Bills and money market mutual funds.
As a result, this shift has affected USDC, which is perceived as more “treasury proximate.” In contrast, Tether, enjoying international favor, has witnessed increased demand despite the prevailing bear market and the ongoing war on crypto.
On the Flipside
- While USDC may have experienced a decline in supply and market share, its robust regulatory framework and association with reputable institutions still make it an attractive option for risk-averse investors seeking stability and compliance.
- The shift towards offshore, unregulated stablecoins raises concerns about the potential for increased volatility and susceptibility to regulatory crackdowns in the future.
- The decline in USDC usage may be influenced not only by the actions of U.S. policymakers but also by market dynamics and competition from other stablecoins, highlighting the complex factors at play in the stablecoin landscape.
Why This Matters
The remarkable surge in Tether’s market share and the decline of Circle’s USDC highlight a notable shift within the stablecoin ecosystem. This development, influenced by U.S. regulatory actions and changing investor preferences, not only impacts the stablecoin issuers but also reflects the evolving landscape of the global crypto market.
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