Ratio between the market cap of USDT and USDC at an all-time low
USDC’s market capitalization has grown 8.27% since May, reaching a record high of $ 55.9 billion on 2 July. In contrast, USDT has experienced a drop of more than 19% in its market valuation, currently standing at around $ 66.14 billion.
USDC is therefore challenging USDT’s supremacy in the stablecoin sector. Specifically, the USDT to USDC ratio was above “9” in August 2020; in July it fell to “1.20”, the lowest value ever recorded.
At the current pace – and with less than $ 10 billion separating the two stablecoins – USDC could exceed USDT by market cap in months, if not weeks.
Interestingly, USDC has already surpassed USDT in “real volume” on the Ethereum blockchain.
USDC offers more guarantees
Cryptocurrency investors became cautious after the Earth project failed in May, $ 40 billion “algorithmic stablecoin”, fearing the same could happen to USDT. This is mainly due to speculations that Tether’s USDT tokens are not 100% backed by cash and other traditional assets, as stated.
As a result, short-sellers increased their positions on the probability of USDT falling below $ 1 soon: The Wall Street Journal he reported that these bearish positions may hold true “hundreds of millions“dollars.
In other words, these traders are betting that Tether will not be able to redeem all of its USDT for $ 1, thus triggering one scenario similar to a “bank run”. As a result, people would start selling their stablecoin at a discounted price, causing the asset to lose the peg.
Many times before in the past, during times of extreme market volatility, USDT has moved below or above its target value of $ 1, although this was much more pronounced in its early years.
For example, in October 2018 the token value dropped to $ 0.85 (on Kraken) due to some items about the insolvency of one of the subsidiaries (the Bitfinex exchange). The same happened after the collapse of the Earth in May, with the USDT slipping briefly to $ 0.97. However, the stablecoin has always recovered its dollar value.
By contrast, USD Coin has slipped below the usual $ 0.99-1 only twice since its launch in 2018. It fell to $ 0.97 during the March 2020 crash due to COVID, then recovered $ 1 and dropped back to $ 0.98 in the same month.
Investor confidence in USDC has increased primarily due to Circle operating as a financial services firm, registered with FinCEN and 46 other state regulators in the United States. Additionally, Circle has been audited by Grant Thornton, a leading global auditing firm.
In June Paolo Ardoino, CTO of Tether, has pledged to have the company’s reserves audited by one of the 12 leading auditing firms. For now, the MHA accounting firm provides quarterly certifications on Tether reserves:
“Everyone is talking about declines, but most of them haven’t left the cryptocurrency market. They’re just waiting for the bottom. #Bitcoin’s market cap has fallen by -70% from its peak, while stablecoins have only fallen by – 11%. “
Everyone is talking about bearish things, but most of them haven’t left the crypto market. They’re just waiting for the bottom.#Bitcoin marketcap decreased by -70% from the top while stablecoin went down by just -11%. pic.twitter.com/dhgDzi9g2A
— Ki Young Ju (@ki_young_ju) June 30, 2022
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