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The Shift In Stablecoin Market Share
By Kapil Rajyaguru
Crypto investors are fleeing Circle’s USD coin (USDC) stablecoin, with many of them switching to Tether, which has reached a 22-month high in market share.
USDC token net outflows have surpassed $10 billion since March 10, when regulators shuttered key reserve banking partner Silicon Valley Bank. U.S. payments firm Circle has weathered SVB’s collapse, and USDC has re-established the dollar price peg it lost in the immediate aftermath, but the token has still dropped 23% from its one-time $43 billion market capitalization, according to crypto price tracker CoinGecko.
USDC’s plunge comes as the stablecoin sector has been severely tested by banking sector uncertainties and increasing regulatory scrutiny. Binance’s BUSD token has also plummeted, among other stablecoins.
USDC remains the second-largest stablecoin with a market capitalization of $33 billion.
Outflows surged starting March 10 as SVB imploded, locking $3.3 billion of cash reserve deposit in its vaults for days until government intervention. The event tossed the stablecoin market into turmoil as USDC and smaller stablecoins lost their price peg temporarily, and also highlighted how fiat-backed stablecoins rely on the soundness of traditional financial systems.
Over the past week, investors have redeemed $1.5 billion more USDC than new issuance, including bankrupt crypto broker Voyager, which redeemed $150 million on Tuesday.
Most investors seem to have fled to Tether’s USDT, the largest stablecoin in the market, boosting its dominance to its highest level since May 2021.
The $132 billion stablecoin market has been in the middle of a major reshuffling since February when New York regulators told stablecoin issuer Paxos to stop minting Binance USD (BUSD), the third-largest stablecoin. BUSD’s supply has tumbled below $8 billion from $16 billion in early February.
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