Since the beginning of the year, Circle and its USDC stablecoin have seen a decrease in dominance on the Ethereum blockchain reflecting a downsizing for the cryptocurrency pegged to the value of the dollar.
Industry leader Tether and its flagship product USDT have seen an opposite trend to USDC since January with several on-chain data points on the rise.
The hope for the industry’s second-largest stablecoin by market capitalization is that future updates and growth in the DeFi world can bring back investor interest.
Full details below.
Summary
The dominance of the USDC stablecoin is descending on the Ethereum network: meanwhile, Tether (USDT) reinforces its hegemony
The USDC stablecoin of issuer Circle is having a really tough time with investors gradually abandoning the cryptocurrency in the Ethereum blockchain and moving to competitor USDT or directly into FIAT.
After two years of fire in which throughout 2020 and 2021 the stablecoin won the market’s respect by gaining more than $37 billion in market capitalization, here it is for much of 2022 and all of 2023 the trend has reversed sharply.
As of the end of February 2022 USDC has seen about $23.5 billion evaporate, equivalent to nearly 50% of its countervalue.
By contrast, since the beginning of the year, the amount lost amounts to $17 billion.
The reasons for that downward slide are many and range from the simple advent of the bear market that triggered trading seasons with low volumes and market and reduced investor presence to far more complex causes.
Certainly there’s the issue of Silicon Valley Bank‘s bankruptcy and USDC’s depeg in March this year where the stablecoin had touched a spike the price of $0.88, recovering parity with the dollar in the following week of trading.
Events like these create distrust in the currency, especially after so many decentralized finance enthusiasts saw their savings burned with the crash of UST and the Terra/Luna ecosystem.
In contrast to USDC, those who have seen considerable success on the Ethereum network is Tether and its USDT stablecoin where we can see a $6.7 billion growth since the beginning of the year.
Paolo Ardoino and Giancarlo Devasini’s product has seen an incredible increase in interest from investors who prefer offshore channels for cryptocurrency transactions.
Overall since 1 January 2023, USDC has reduced its share in Ethereum from 41.58% dominance to the current 33% while USDT has expanded from 32.34% to 52.86%.
The overtaking point where USDT became more popular than USDC on ERC-20 network came right at the depeg incident for Circle vaulting.
Extensive use cases and future planning bode well for a USDC upswing
As Tether (USDT) grows and USDC loses ground on Ethereum’s blockchain, we can see how future expansion projects and new collaborations could lift the stablecoin’s fortunes.
A few days ago, Coinbase announced that it had acquired a minority stake with Circle Internet Financial, at the same time seizing an old joint partnership in the Centre Consortium.
The cryptocurrency exchange, which also made another big leap in August by launching the L2 Base blockchain in the mainnet, now wants to gain full control of USDC dominance and issuance.
Coinbase’s plan is to expand its dominance in every area of the crypto landscape by becoming the undisputed leader and overtaking main rival Binance, which had to drop support for BUSD a few months ago.
The intent is also to follow in the footsteps of payments giant PayPal, which recently launched its own stablecoin PYUSD in partnership with Paxos.
Coinbase’s entry into USDC will certainly bring a wave of new attention from institutional investors who, counting on the reliability and seriousness of the exchange, could devote a lot of capital to the cryptocurrency.
In addition, Circle is planning to expand its presence on six other blockchains between September and October.
The names of the networks on which USDC will land have not yet been released, but rumors speak of a high probability for Polkadot, Near, Optimism, Cosmos, and Base.
What is already in itself the stablecoin with the most use cases in the DeFi world has plans to move even further in this direction by becoming ever more of a benchmark for an economy based on dApp and smart contracts.
According to this information, we can imagine a near future where both USDT and USDC will have a huge impact for cryptocurrency exchanges, where however the former will be used in off-shore channels and on centralized exchanges while the latter will find a home exclusively in decentralized finance.
We can already see how Circle’s coin is more present as liquidity on DEXs such as Uniswap, where USDT plays a marginal role.
