Tether has long been the most stablecoin in the market, with a market capitalization of over $2 billion. Tether has established itself as one of the top 10 cryptocurrencies in terms of value. With Terra’s UST’s fall, Tether’s importance has grown even more apparent.

Another major stablecoin, USD Coin (USDC), is making some progress. In reality, data suggests that it might displace Tether despite growing distrust of it. Here are some key facts:

  • The total supply of USDC has been increasing month after month.
  • Since January, the market cap of USDC has increased by over 1000%.
  • In May, the USDT token saw the most redemptions, with over two million.
Data Source: Tradingview

Is USDC taking over?

USDC has not yet achieved the same level as Tether. However, it appears that the decline of UST has expedited the adoption of USDC considerably.

For instance, consider this scenario. In January, USDC had a market value of about $4.1 billion. Today, the stablecoin boasts a market capitalization of more than $55 billion. This is almost 10 times higher than it was. 

On the other hand, Tether’s market cap has shrunk to $35 billion from its all-time high of $44 billion in April.

This means that even though Tether is still the biggest stablecoin by market cap. USDC’s growth has been nothing short of phenomenal.

But why is this happening? There are a few reasons. First, Tether has been embroiled in controversy for a long time now.

From claims that it doesn’t have enough USD. To back all its tokens to concerns about its relationship with the Bitfinex exchange. There have been many questions raised about the stablecoin.

Second, the recent rise in Bitcoin and Ethereum prices has led to a lot of money flowing into the cryptocurrency market. And a lot of this money comes from institutional investors who are more likely to trust a regulated currency like USDC.

So it’s not surprising that USDC is eating into Tether’s market share. But what is surprising is how quickly this is happening.

Additionally, USDT has seen a surge in redemptions during the same period. Furthermore, USDC’s development was accompanied by an increase in USDT redemptions throughout the previous several weeks.

These indicators suggest that investor interest in USDC is increasing. If this trend persists, the currency will be closer to USDT by the end of 2022.

Is there a danger of the USDC depreciating?

The demise of Terra was marked by the moment when its UST de-pegged from the dollar. Some people are also concerned that other dollar-pegged cryptocurrencies, such as USDC, might suffer a similar fate.

The most significant danger is that if the US dollar weakens. The creators of these coins will be compelled to print extra coins to maintain the peg. This might result in inflation and a decline in value for coin owners.

Another risk is that if demand for the coin falls, the price could drop sharply as investors sell off their holdings. 

We currently do not anticipate any major risks of USDC de-pegging, however, this does not negate the risk. Even through the most challenging months in crypto so far, USDC has maintained its peg rather well.

It is important to note that while USDC is currently the most popular dollar-pegged stablecoin, it is not the only one.

There are other coins such as Tether (USDT), TrueUSD (TUSD), and Paxos Standard Token (PAX) that have all maintained their dollar peg throughout the year.

So while USDT may be phased out by the USDC, it is unlikely that all dollar-pegged stablecoins will suffer the same fate.

Cryptocurrency markets are unpredictable and ever-changing, so it is impossible to say definitively what the future holds. However, it seems that USDT may have some competition from other dollar-pegged stablecoins shortly.

James Atkins

I have been writing copy for blockchain-related projects since 2017. I understand the importance of being able to communicate clearly and effectively with both technical and non-technical audiences. By leveraging my understanding of the crypto industry trends, I can help increase adoption in this rapidly evolving landscape.