Circle’s USDC on track to topple Tether USDT as the top stablecoin in 2022


Circle’s native stablecoin USD Coin (USDC) growth over the past two months has been nothing short of spectacular compared to its $66 billion rival giant Tether (USDT).

USDT, USDC market cap ratios hit lowest on record

Notably, USDC’s market capitalization is up 8.27% since May, reaching a high of $55.9 billion on July 2. In contrast, USDT has suffered a decline of over 19% in its market valuation, which currently stands at approximately $66.14 billion.


USDT circulating market cap. Source: Mesari

This is the closest USDC to challenge USDT dominance in the stablecoin sector based on the narrowing gap between their market caps.

In detail, the USDT to USDC market cap ratio was above “9” in August 2020. However, in July, it fell to 1.20, the lowest on record, as shown in the chart below.

USDT to USDC market cap ratio. Source: TradingView

At the current rate – and with less than $10 billion now separating the two stablecoins – USDC could surpass USDT by market capitalization in a few months, if not weeks.

Interestingly, USDC has already flipped USDT with respect to “actual volume” on top of the Ethereum blockchain.

USDT passes doubt

Crypto investors have been cautious since the collapse of Terra’s $40 billion “algorithmic stablecoin” project in May, fearing the same could happen to USDT. This is mainly due to speculation that Tether’s USDT token is not 100% backed by cash and other traditional assets as it claims.

As a result, short sellers have raised their bets on the possibility that USDT will soon fall below its $1-peg, with the Wall Street Journal reporting that these bearish conditions could be worth “hundreds of millions” of dollars.

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These bets predict that Tether will not be able to redeem all of its USDT for one dollar in a “bank run”-like scenario. As a result, people will start selling their stablecoins at a discount, breaking the peg.

USDT has a history of moving below or above its $1-peg during periods of extreme market volatility, although this was more pronounced in its earlier days.

For example, in October 2018, the token’s value fell to $0.85 (on Kraken), amid rumors that one of its affiliates (crypto exchange Bitfinex) was bankrupt.

USDT price chart from 2015. Source: CoinMarketCap

The same thing happened after Terra collapsed in May, with the value of USDT briefly falling as low as $0.97. Nevertheless, the stablecoin reclaimed its dollar peg every now and then.

In contrast, the USD coin has slipped below the normal $0.99-1 only twice since its launch in 2018. It dropped to $0.97 during the “Covid crash” in March 2020, only to recover $1 and again to $0.98 in the same month.

USDC price chart from 2019. Source: CoinMarketCap

Crypto investors have strengthened their confidence in USDC, primarily Circle operating as a money services business, which is registered with FinCEN and other 46 state regulators in the US, as a result, the firm is compliant with money transmission laws. Reports its reserves to the authorities.

In addition, Circle is audited by Grant Thornton, a leading global accounting firm.

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Tether’s chief technical officer, Paolo Ardoino, committed in June that his reserves would be fully audited by one of the top 12 accounting firms. For now, accounting firm MHA is providing quarterly verification of Tether reserves.

Until that happens, USDC is on track to close the gap with USDT for a potential flipping event, especially as demand for the stablecoin is high amid global economic turmoil.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, so you should do your own research when making a decision.