The United States’ Crypto War Impacts Stablecoin Ecosystem: Tether Soars, USDC Struggles

The United States’ Crypto War Impacts Stablecoin Ecosystem: Tether Soars, USDC Struggles

The stablecoin ecosystem in the United States has been significantly impacted by the ongoing crypto war, leading to a noticeable divide between the two largest issuers. Tether, according to its transparency report, has reached a record high total supply of 83.36 billion USDT.

Industry expert Will Clemente highlights the striking divergence between Tether and USDC, reflecting easier access to treasuries for US-based USDC holders and regulatory uncertainty faced by US-based Circle, the issuer of USDC. What was once a competitive advantage for USDC has now become a disadvantage.

Circle, the company behind USDC, is currently facing tough times. Previously favored by institutions, USDC is now experiencing reduced usage due to the widespread crackdown on cryptocurrencies. Exposure to the now-defunct Silicon Valley Bank has also had a significant negative impact on Circle. In early March, USDC de-pegged, causing a collapse of investor confidence.

The supply of USDC, which reached a peak of over $56 billion in June 2022, has since dropped by almost 50%. Consequently, its market share has plummeted to 22%, while Tether’s dominance has surged to 64.5%.

At present, CoinGecko estimates the total market valuation of stablecoins at $128.9 billion. Despite significant value declines during the bear market, stablecoins still account for over 12% of the entire cryptocurrency market.

On June 12, analytics firm Glassnode reported that outflow volumes for USDT and USDC had reached a monthly high from centralized exchanges. Following the SEC’s filing of two lawsuits and enforcement actions against exchanges, investors have sought safer havens, with Binance being particularly affected by this exodus.

Binance CEO Changpeng Zhao cautioned investors against relying too heavily on Binance outflow numbers from analytics platforms, as they incorporate the total value locked (TVL), which includes fluctuations in the values of crypto assets.

Over the weekend, the cryptocurrency market experienced reduced volatility. The overall capitalization remained relatively stable, hovering around $1.06 trillion.