The market capitalization of USD Coin (USDC), a stablecoin issued by U.S.-based cost tech agency Circle, has dropped beneath $50 billion for the primary time since January 2022.
On the weekly chart, USDC’s market cap, which displays the variety of U.S. dollar-backed tokens in circulation, fell to $49.39 billion on Sept. 26, down virtually 12% from its report excessive of $55.88 billion, established merely three months in the past.
In distinction, the market cap of Tether (USDT), which risked shedding its high stablecoin place to USDC in May, crossed above $68 billion on Sept. 26, albeit nonetheless down 17.4% from its report excessive of $82.33 billion in May 2022.
The divergence between USDT and USDC reveals buyers’ renewed desire for the previous. Let’s check out the components boosting Tether as the highest stablecoin.
Binance’s USDC suspension
Binance, the world’s largest cryptocurrency alternate by quantity, introduced earlier in September that it might convert its customers’ USDC balances for its personal stablecoin, Binance USD (BUSD). The conversion will start on Sept. 29 and doesn’t apply to USDT.
The alternate mentioned it desires to “improve liquidity and capital-efficiency for customers” by way of what seems to be a pressured conversion in an more and more aggressive stablecoin sector. As a end result, Binance suspended spot, future and margin buying and selling in USDC.
8/ 1. Binance’s pressured “Auto-conversion” is blatantly monopolistic habits of a typical FinTech firm
They aren’t any higher than conventional banks which have the ability to freeze or take management of person funds
Where is the decentralized future that #Web3 customers have been promised?
— Momentum 6 (@Momentum_6) September 21, 2022
USDC’s market cap has plunged by $9.5 billion because the announcement.
Following Binance’s footsteps, the India-based cryptocurrency alternate additionally stopped deposits of USDC starting Sept. 26.
Whales ditch USDC after Terra fiasco
The USDC provide assist by high 1% addresses (aka whales) has dropped to 88.36% in September from its year-to-date excessive of 93.84% in February, in keeping with information collected by Glassnode.
Interestingly, the plunge accelerated after Terra, a $40-billion “algorithmic stablecoin” venture, collapsed in May, stirring a unfavorable sentiment towards the complete stablecoin business.
For occasion, the full market cap of all stablecoins noticed the worst correction in 2022, dropping from a February excessive of $97.37 billion to $80.65 billion in September, in keeping with CryptoQuant.
Tornado Cash sanctions
The USDC market cap plunge has accelerated after the U.S. Treasury imposed sanctions on crypto mixing service Tornado Cash over cash laundering issues.
Circle responded to the sanctions by freezing all USDC wallets owned by Tornado Cash. The agency additionally prevented addresses which may be related to the banned mixing service from utilizing USDC. In distinction, Tether averted blacklisting Tornado Cash addresses.
Independent market analyst Geralt Davidson handled Circle’s response to the Tornado Cash sanction as a cue that holding USDC is riskier in comparison with its stablecoin rivals.
“People now have realized there’s extra threat holding USDC, Circle blacklisted all of the USDC on Tornado Cash addresses sanctioned by US Treasury,” he famous in August 2022, including:
“USDC looks like the one token being blacklisted, whereas different ERC-20 tokens weren’t.”
Davidson additionally handled Tornado Cash as one of many the reason why USDC whales have been dumping the stablecoin in current months.
The views and opinions expressed listed below are solely these of the creator and don’t essentially replicate the views of Cryptonomie.eu. Every funding and buying and selling transfer entails threat, you need to conduct your individual analysis when making a call.