Recent data from CoinGecko reveals a notable shift in the market dominance of stablecoins pegged to the United States dollar. While some stablecoins have experienced a decline in market share, Tether’s USDT has witnessed a significant surge.
Over the past year, Circle’s USD Coin (USDC) has seen its market share decrease from 34.88% to 23.05% at the time of writing. Similarly, Binance USD (BUSD) witnessed a decline from 11.68% to 4.18%, and Dai (DAI) remained relatively stable at 3.66%, down from 4.05% in May 2022.
In contrast, Tether’s USDT has experienced a contrasting trend, with its market dominance currently standing at 65.89%, up from 47.04% a year ago. USDT’s market capitalization has soared to $83.1 billion, while USDC’s market cap has dropped to $29 billion from its peak of $55 billion.
Circle CEO Jeremy Allaire attributes the decline in USDC’s market capitalization to the regulatory crackdown on cryptocurrencies in the United States. On the other hand, the current regulatory environment seems to be favoring Tether.
The depegging of USDC from the dollar in March, due to the U.S. banking crisis and regulatory actions against crypto-friendly banks like Silicon Valley Bank, has further impacted its market performance.
Stablecoins have gained popularity as they bridge the gap between the crypto space and traditional finance. However, concerns over transparency, particularly regarding stablecoin reserves, have been raised. Tether, in particular, has faced criticism for its lack of transparency and was fined $18.5 million in 2021 by the New York Attorney General’s Office for misrepresenting its reserves.
In response to these criticisms, Tether has taken steps to improve transparency and reduce its exposure to the banking system. The company has increased its holdings of U.S. Treasury bills and reduced its counterparty risk by withdrawing billions of dollars from banks.
Circle has also made adjustments to its reserves to mitigate risks amid global economic uncertainty. The company has modified its holdings and no longer holds Treasuries maturing beyond early June.
The shifting market dynamics of stablecoins reflect the ongoing changes and challenges faced by the cryptocurrency industry, highlighting the importance of regulatory compliance and transparency for stablecoin issuers.
