Stablecoin battle heats up as USDC flips USDT on the Ethereum network, with Investors increasingly favoring the former.
Data from on-chain analytics platform Nansen suggests that a charge of guard within the stablecoin market may be on the cards. According to them, the market capitalization of stablecoin giants USDT and USDC are on a divergent path, with sentiment shifting in favour of the latter.
The chart above shows that the USDC is the biggest stablecoin on the Ethereum network, with a market capitalization of over $46 billion. Interestingly, USDC surpassed Tether in mid-January 2022, as the largest stablecoin by market capitalization saw its fortune dwindle on the largest smart contract platform.
Currently, the USDC is second among stablecoins on the Ethereum network, with $32.5 billion. The BUSD takes the third position with $17.8 billion, while DAI and PAX complete the number with $6.4B and $855 million, respectively.
USDT Volume Shows It Is Still King
Meanwhile, despite seeing a significant increase in its market capitalisation and stablecoin dominance, the USDC’s volume still pales compared to the USDT. According to Pseudonymous analyst Fed Surfer, the volume is a much more important indicator for stablecoins as it shows actual usage.
As seen above, USDT continues to dominate the daily volume among stablecoins with between 80-90% of all trades. Its dominance extends beyond the stablecoin sector as its traded volume exceeds that of Bitcoin and Ethereum despite significantly lower market capitalisation. Consequently, the data suggests that the USDT may still be the most trusted stablecoin despite investor sentiment shifting towards the USDC.
As investors continue to favour the USDC, its traded volume has risen significantly. However, there is still a long way to go before it can challenge Tether’s dominance. By all indications, it may prove a worth challenger in the long run.
Tether Continues To Face Scrutiny Over Its Reserve
One of the issues that have continued to plague Tether’s dominance has been its reserve assets. The secretive nature of the reserve asset declaration has led to investors losing confidence in the USDT, especially after the recent liquidity crisis within the space.
Instead, many investors turned to the USDC, which has been audited and is backed by cash and US treasuries. In addition, Circle, the company behind the USDC, offers money transfer services. It is registered with FinCEN and 46 other state regulators in the United States.
Furthermore, the company’s CEO recently said that the USDC’s reserves and liquidity will now be attested to each week by Circle. He revealed that this move would help assuage investor fears over stablecoins and their underlying assets. All of these have seen more investors trade their USDT for USDC.
Meanwhile, Tether only recently revealed its reserve analysis as part of its effort to comply with a settlement agreed to with the New York Attorney General’s office. The prosecutor had earlier investigated Tether and its sister crypto exchange Bitfinex over the cover-up of some $800 million in losses. Bitfinex and Tether paid an $18.5 million fine while also agreeing to provide quarterly breakdowns of its reserves as part of the settlement.
Despite its efforts, investors continue to remain skeptical about tether. This has prompted the company’s Chief Technical Officer Paolo Ardoino to reveal an impending audit of its reserves by a top 12 accounting firm. He believes this will provide more transparency and increase investor confidence in the USDT. While that is still to come, the USDC continues to chip at the USDT’s dominance.
Do you think the USDC will eventually flip the USDT to become the number one stablecoin in the crypto market? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
