The market capitalization of USD Coin (USDC), a stablecoin issued by U.S.-based fee tech agency Circle, has dropped beneath $50 billion for the primary time since January 2022.
On the weekly chart, USDC’s market cap, which displays the variety of U.S. dollar-backed tokens in circulation, fell to $49.39 billion on Sept. 26, down virtually 12% from its report excessive of $55.88 billion, established merely three months in the past.
In distinction, the market cap of Tether (USDT), which risked losing its top stablecoin position to USDC in Might, crossed above $68 billion on Sept. 26, albeit nonetheless down 17.4% from its report excessive of $82.33 billion in Might 2022.
The divergence between USDT and USDC exhibits buyers’ renewed desire for the previous. Let’s check out the components boosting Tether as the highest stablecoin.
Binance’s USDC suspension
Binance, the world’s largest cryptocurrency trade by quantity, introduced earlier in September that it would convert its customers’ USDC balances for its personal stablecoin, Binance USD (BUSD). The conversion will begin on Sept. 29 and doesn’t apply to USDT.
The trade mentioned it needs to “improve liquidity and capital-efficiency for customers” by way of what seems to be a pressured conversion in an more and more aggressive stablecoin sector. Because of this, Binance suspended spot, future and margin buying and selling in USDC.
8/ 1. Binance’s pressured “Auto-conversion” is blatantly monopolistic habits of a typical FinTech firm
They’re no higher than conventional banks which have the ability to freeze or take management of person funds
The place is the decentralized future that #Web3 customers have been promised?
— Momentum 6 (@Momentum_6) September 21, 2022
USDC’s market cap has plunged by $9.5 billion for the reason that announcement.
Following Binance’s footsteps, the India-based cryptocurrency trade additionally stopped deposits of USDC starting Sept. 26.
Whales ditch USDC after Terra fiasco
The USDC provide assist by prime 1% addresses (aka whales) has dropped to 88.36% in September from its year-to-date excessive of 93.84% in February, in line with knowledge collected by Glassnode.
Apparently, the plunge accelerated after Terra, a $40-billion “algorithmic stablecoin” venture, collapsed in May, stirring a detrimental sentiment towards your entire stablecoin business.
As an example, the whole market cap of all stablecoins noticed the worst correction in 2022, dropping from a February excessive of $97.37 billion to $80.65 billion in September, in line with CryptoQuant.
Twister Money sanctions
The USDC market cap plunge has accelerated after the U.S. Treasury imposed sanctions on crypto mixing service Tornado Cash over cash laundering issues.
Circle responded to the sanctions by freezing all USDC wallets owned by Twister Money. The agency additionally prevented addresses which may be related to the banned mixing service from utilizing USDC. In distinction, Tether avoided blacklisting Twister Money addresses.
Unbiased market analyst Geralt Davidson handled Circle’s response to the Twister Money sanction as a cue that holding USDC is riskier in comparison with its stablecoin rivals.
“Individuals now have realized there may be extra danger holding USDC, Circle blacklisted all of the USDC on Twister Money addresses sanctioned by US Treasury,” he noted in August 2022, including:
“USDC looks like the one token being blacklisted, whereas different ERC-20 tokens weren’t.”
Davidson additionally treated Twister Money as one of many the explanation why USDC whales have been dumping the stablecoin in current months.
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