The cryptosphere loves to speculate about the “musical chairs” game between cryptos. Whether they are based on real data or on more subjective biases, these debates regularly worry him. But party stances have little to do with the “coup” brewing between the two main stablecoins in the sector. USDC, which has shown unstoppable growth since 2020, thanks to the latest events that have shaken the cryptocurrency market, may take the top spot from USDT this fall. Let’s see.
USDC will soon overthrow USDT
Rollover on the way. No, this is not about the overthrow of the king of Bitcoin by his loyal second, Ether. The latter, under the influence of his inevitable technological metamorphosis (transition from proof of work to proof of stake), could in the eyes of some make him caliph instead of caliph. controversial point of view. After all, it is conceivable, but not soon.
On the other hand, in the world of so-called stable cryptocurrencies, the USDT trailblazer, which has entrenched itself in first place since its inception, may well find itself thrown aside by the USDC, which has been mocking it for some time now. At least, this is what Arcane Research analysts think, who, given the upward curve of the USDC and the falling trajectory of the USDT, expect a reversal soon.
For all investors in this sector, stablecoins are a key element of their crypto portfolio acquisition strategy. They allow not only to stabilize the value, but also, as in France, to avoid taxation of capital gains, at least temporarily.
They also underlie many decentralized finance (DeFi) devices, allowing users to earn attractive returns (compared to traditional finance). The main pillars of the sector, which explains the preferential treatment reserved for them by regulators, so choosing a stablecoin is important to protect your portfolio from the volatility of BTC and others.
Worrisome Context That Favors USDC
For a long time, Tether dominated the market. Its primacy somehow guaranteed its liquidity, despite repeated opacity about the nature of its reserves.
But today its dominance is weakening every month. A phenomenon that is not new, but which has accelerated since the UST algorithmic stablecoin explosion in early May, when the USDT briefly lost parity with the dollar. USDT fell to $0.97 and took almost two months to recover its peg to $1, while USDC rebounded its peg almost immediately, establishing itself as the “most stable” stablecoin for the industry. Also because of greater efforts than its competitor to comply with audits, regulations and higher standards of transparency, especially regarding the details of its reservations. Shown benevolence, which, however, was lacking in the past and which reappeared in the context of general mistrust.
But still, today the market capitalization of the two best stablecoins has never been so close. They are separated by just over ten billion: 65.8 billion US dollars, 54.5 billion US dollars. However, in terms of trading volume, USDT remains king. As such, it has recorded a trading volume of $67.5 billion over the past 24 hours, while its runner-up only posted a modest $7 billion in volume, according to CoinGecko. An aspect that does not seem to contradict Arcane Research’s predictions regarding the evolution of UDST and USDC capitalization.
In support of this hypothesis, the momentum and narrative is on the side of Circle stablecoin, with growing support from service providers increasingly giving it a prominent place even if it doesn’t appear explicitly again, and a plebiscite within DeFi. . In fact, the study puts forward exact numbers.
If these growth curves are extrapolated, then on October 10, 2022, USDC will dethrone Tether as the largest stablecoin with a market cap of $61.3 billion.
Clash of the Titans
Bold but believable. Especially since regulators around the world, fully occupied with their task of controlling the market, may favor USDC in its constant pursuit of notoriety, which has already begun pushing its pawns to become a federally registered crypto bank. In addition, new US legislation will likely require stablecoin issuers to be audited on a monthly basis, and those who do not play this game are unlikely to be able to operate in the US markets. However, Circle has just made a commitment. Strong arguments to reaffirm the strength and legitimacy of their stablecoin and overthrow its illustrious elder, still a bit sulphurous, who nonetheless fights hard to maintain his dominance.
So, despite spring break, he has since managed to buy back billions of dollars. Pretty reassuring, but not enough to restore confidence. Just like revisiting your reserves to reduce risky holdings of non-monetary assets. Efforts that don’t change the fact that investors choose to limit their exposure to an asset when they don’t want to open it directly. Several hedge funds have entered hundreds of millions of dollars in USDT short positions.
Decline and rise
The loss of its market capitalization during the collapse of the Terra Luna ecosystem, which cost it an estimated $10 billion in losses, may have come as a punctual sequence in its long tortuous history. But the calm was short-lived. Other bad episodes have eroded investor confidence yet again, such as the Oasis blockchain incident when USDT fell to $0.12 due to a bridge failure.
The fact is that since April 8, the USDT market cap has fallen by about 18%, while the USDC market cap has increased by 15%, that is, the cumulative change was 33% in its favor. Which effectively confirms the thesis about switching between them in the medium term. However, provided that an event of an unexpected nature, like many that have interspersed in the history of cryptography, does not interfere with Arcane Research’s forecast.