Circle’s USDC stablecoin has experienced a significant decrease in circulating supply, leading to questions about its ability to maintain its position as the world’s second-largest stablecoin. Circle reported that over the course of seven days, USDC redemptions surpassed new coin issuances, resulting in a $100 million reduction in supply. This downward trend, which has been ongoing for a year, has wiped out approximately $28 billion from USDC’s market capitalization.
This decline in USDC’s circulation is not an isolated event, as the previous month witnessed $4.6 billion in redemptions compared to $3.6 billion in new stablecoin issuance. The contraction of USDC’s supply by $10 billion in March, driven by concerns over Circle’s exposure to a Silicon Valley bank, also contributed to the ongoing loss of market share.
Meanwhile, Tether, Circle’s main competitor, has made significant strides over the past year, solidifying its leading position in the stablecoin market. On-chain data reveals a surge of approximately $17.8 billion in USDT circulation, with most of this growth occurring in 2023. In the same week that USDC’s supply declined, the total amount of USDT in circulation expanded by $22 million.
Tether’s dominance has experienced substantial growth, currently standing at over 7% of the stablecoin market. Conversely, USDC’s market dominance slipped below 5% in January and has not recovered, currently hovering around 2.3%. The rise of smaller stablecoin rivals such as Dai and TrueUSD also poses a challenge to the near-duopoly of Circle and Tether, although the two giants still constitute over 83% of all dollar-pegged stablecoins.
It’s worth noting that USDT’s dominance has extended beyond the Ethereum blockchain, as the TRON network has embraced Tether, hosting over $44 billion USDT as TRC20 tokens. TRON’s support for USDD stablecoin further strengthens its strategic vision for the network, as TRX transactions are faster and cheaper than Ethereum.
The declining circulation of stablecoins on centralized exchanges, as reported by glassnode and todayq news, indicates a broader trend. The volume of stablecoins on exchanges has reached a low point, estimated to be below $20 billion, the lowest since April 2021. This decline is attributed to various factors, including increased regulatory scrutiny and the collapse of crypto-friendly banks in the US.
The stablecoins in the metrics include the following: BUSD, GUSD, HSUD, DAI, USDP, EURS, SAI, sUSD, USDT, and USDC.
These developments in the stablecoin market have broader implications for the metaverse and the crypto sector as a whole. The shift in dominance from USDC to Tether, along with the emergence of smaller rivals, suggests a growing diversification of stablecoin options. This could have an impact on the stability and liquidity of the metaverse, as different stablecoins compete for users and market share.