TL; DR
-
Why has Circle’s USDC market cap dropped from ~$56 billion last year to? ~$26 billion today, when Tether’s USDT market cap is reached increased to an all-time high of $83 billion?
-
While not really their fault, confidence seems to have been damaged by the collapse of the banks earlier this year.
-
In the world of fiat, interest rates have been steadily rising. Anyone holding their money in USDC now will easily lose 4-5% interest.
-
Finally, as more people use USDT as their stablecoin of choice, it indicates to everyone else that USDT is the best option (when in reality they are almost identical).
Full story
Dust off your tinfoil hats, because today we take a short trip to ‘Theoryland’.
The topic: why Circle’s USDC market cap has been cut from ~$56 billion last year to ~$26 billion today, when Tether’s USDT market cap is reached increased to an all-time high of $83 billion?
They are both stablecoins, meaning they both do the same thing. So why does the market use them differently?
We’re not sure, but we have some theories.
-
Remember when Silicon Valley Bank went bankrupt in March of this year, along with Silvergate and Signature Bank? At the time, it came out that Circle had $3 billion tied up due to the messy banking situation, temporarily lowering the value of 1USDC to $0.87 (it should always be $1).
While it may simply seem like they were unlucky with their banking partners, it left a sour taste in people’s mouths. While it wasn’t really their fault, the trust seems broken.
-
In the world of fiat, interest rates have been steadily rising. Anyone holding their money in USDC now will easily lose 4-5% interest.
-
Finally, as more people use USDT as their stablecoin of choice, it indicates to everyone else that USDT is the best option (when in reality they are almost identical).
Just as every teenager wants to see Taylor Swift live, not because her music is so great, but because everyone else is going, so does the choice of stablecoin.
Interestingly, Circle continues to innovate.
Last week, they announced an integration with Shopify, allowing merchants to enjoy “almost free payment acceptance” when using USDC.
In addition, they announced that they were going to roll out the token six additional blockchains.
Will there eventually be one stablecoin that will rule them all (i.e. USDT)?
Or will Circle regain some traction with their continued innovation?
Let’s find out!