The market capitalization of the US Dollar (USDC), a stablecoin issued by American payment company Circle, has fallen below $50 billion for the first time since January 2022.
On the weekly chart, the market capitalization of USDC, which reflects the number of US dollar-backed tokens in circulation, fell to $49.39 billion on September 26, nearly 12% from an all-time high of $55.88 billion just three months ago.
USDC and USDT weekly market cap. Source: Trading View
In contrast, the market capitalization of Tether (USDT), which risked losing its leading stable position against USDC in May, exceeded $68 billion on September 26, although it is still down 17.4% from its all-time high of $82.33 billion. . May 2022.
The difference between USDT and USDC shows that investors are favoring the former once again. Let’s take a look at the factors that make Tether the best stablecoin.
Binance USDC Commentary
Binance, the world’s largest cryptocurrency exchange by volume, announced earlier in September that it would convert user US dollar balances for its native stablecoin Binance USD (BUSD). Transfer begins September 29th and does not apply to USDT.
The exchange said it wanted to “improve liquidity and capital efficiency for users” through forced conversion in an increasingly competitive stablecoin sector. As a result, Binance has suspended spot, futures and margin trading in USDC.
Since the announcement, USDC’s market capitalization has fallen by $9.5 billion.
In the footsteps of Binance, the crypto exchange in India has also suspended US dollar deposits as of September 26.
Related: Binance: No Plans for Automated Rope Shifting, Although That ‘Could Change’
Whales Abandon USDC After Terra . Failure
USDC aid fell from the top 1% (also known as whale) to 88.36% in September from its highest level so far at 93.84% in February, according to data compiled by Glassnode.
USDC bid is held by the top 1% of titles. Source: glassnode
Interestingly, the decline accelerated after the collapse of Terra, a $40 billion “algorithmic stable” project, in May, causing negative sentiment for the entire stablecoin industry.
For example, the total market capitalization of all stablecoins suffered their worst correction in 2022, falling from a February high of $97.37 billion to $80.65 billion in September, according to data from CryptoQuant.
All stablecoins are in circulation. Source: CryptoQuant
Tornado Cash Penalties
The decline in USDC’s market capitalization accelerated after the US Treasury imposed sanctions on crypto-mixing service Tornado Cash over money laundering concerns.
Circle responded to the sanctions by freezing all USDC wallets held by Tornado Cash. The company has also blocked USDC’s use of addresses that may be associated with the banned mixing service. In contrast, Tether has avoided blacklisting Tornado Cash addresses.
Independent market analyst Geralt Davidson took Circle’s response to the Tornado Cash sanctions as an indication that holding the US dollar is more risky compared to its stablecoin rivals.
He noted in August 2022 that “Now that people realize that holding USDC has a lot of risk, Circle has blacklisted all USDC addresses to Tornado Cash authorized by the US Treasury,” adding:
“USDC appears to be the only token in the blacklist, while the other ERC-20 tokens are not.”