Concerns about Tether is shadowing USD Coin’s rising attention

After Terra’s UST craters, dollar-pegged stablecoins have received a lot of attention. There are legitimate concerns that another de-peg might pose systemic threats to the rest of the cryptocurrency market.

USD Coin, on the other hand, has emerged as one of the most prominent alternatives to Terra’s UST. Here is why:

• A verified committee of professionals manages USD Coin.
• The USDC is also secured by a currency that is actually kept in reserve.
• The reserve assets backing the stablecoin include US Treasury bills, as well as other instruments.
• USD Coin is a Stablecoin pegged to the USD and backed 1:1 by USDC reserves.

What is the relationship between USD Coin and Tether?

USD Coin has all the characteristics needed to become a major stablecoin, according to the information provided above.

Its market capitalization has been increasing, especially following the failure of Terra UST. However, there are several indicators that USDC is not growing at the same rate as its market capitalization implies. 

First, Tether (USDT) still dominates the USD-backed stablecoin market. USDT has a total supply of over $10 billion, while USDC only has about $600 million in supply.

This means that for every USDT, there are nearly 17 USDCs. In other words, USDT still has a huge lead in terms of market capitalization.

Second, USDT’s trading volume is still much higher than USDC’s. In the last 24 hours, USDT’s trading volume was $21.5 billion, while USDC’s was only $1.2 billion. This means that USDT is still being used much more than USDC.

For example, USDC liquidity on Uniswap, one of the world’s largest decentralized exchanges, has dipped remarkably in recent months.

A platform with a lot of liquidity like Uniswap generally indicates that a stablecoin is highly sought-after. The fact that USDC is declining is cause for concern.

USD Coin (USDC) is gaining attention as a cryptocurrency, but Tether’s (USDT) shadow still surrounds it.

USDT still has a huge lead in terms of market capitalization, trading volume, and liquidity. This means that USDT is still being used much more than USDC.

Many of the top wallets are also favoring Tether. Glassnode discovers that the proportion of USDC held by 1% of the world’s largest cryptocurrency wallets is at a one-year low.

While this may not be a cause for worry, it shows that demand for the coin is limited.

USD Coin has only been around for a year, while Tether has been around since 2014. The coin also benefits from being the first mover in this space.

USDT also has more credibility because it is backed by US dollars held in reserve. While USDC is backed by fiat currency held by Circle.

Is the USDC facing threats of de-pegging?

At the moment, there is no indication that USDC is in danger of de-pegging. Of course, investors have been on edge since the UST collapse. However, so far, USDC has proven to be quite resilient as a dollar peg. 

If USDT were to collapse, it would have a ripple effect on the entire cryptocurrency market.

USDT is used to trade against other cryptocurrencies, so a collapse would likely lead to a sell-off in other coins. This could lead to a general loss of confidence in cryptocurrency, and a flight to fiat currency.

It’s doubtful we’ll see another de-pegging anytime soon. However, one thing we can anticipate is that USDC will take years to compete with Tether.

USDT has too much of a first mover advantage and simply put, there is too much USDT in circulation. It would take a long time for USDC to catch up.

In the meantime, USDT will continue to be the go-to stablecoin for cryptocurrency traders.