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Battle of the top stablecoins 2022: Circle's USDC soon to be bigger than Tether (USDT)?

 


The growth of Circle's stablecoin, USD Coin ( USDC ), over the past two months compared to its competitor Tether ( USDT ) is nothing short of spectacular.


USDT/USDC Market Cap Ratio Hits Lowest Ever

USDC's market cap is up 8.27 percent since May, peaking at $55.9 billion on July 2. In contrast, USDT's market valuation is down over 19 percent and currently stands at 66, $14 billion.

With this, the USDC is getting closer and closer to the USDT in terms of market capitalization.


In August 2020, the USDT to USDC market cap ratio was over "9". In July, however, it fell to 1.20, its lowest level ever.

There is only $10 billion between the two stablecoins and at the current rate, USDC may overtake USDT by market cap in a few months or even weeks. 


In fact, USDC has already overtaken USDT in terms of “real volume” on the Ethereum blockchain .


USDT untouched by doubts

Crypto investors have become cautious since the collapse of Terra . The " algorithmic stablecoin" project was worth $40 billion until recently and plummeted in May. Investors fear the same could happen to USDT. This is primarily due to rumors that the Tether USDT tokens are not 100 percent collateralized with cash and other traditional assets as the company claims.


Hence, short sellers have placed even more bets on USDT falling below $1 soon. The Wall Street Journal reported that these bearish positions could be in the "hundreds of millions" of dollars.

With this bet, traders assume that Tether would not be able to exchange all of its USDT for dollars in a rush . As a result, people would sell their stablecoins at a discount, causing the coin to lose its peg.


USDT has a history of going below or above $1 amid extreme market volatility. When the project had just started, it was still very strong.


For example, the value of the token fell as low as $0.85 (on Kraken) in October 2018 amid rumors that its sister company, crypto exchange Bitfinex, was in bankruptcy .

The same happened after Terra collapsed in May. The USDT briefly fell as low as $0.97. Still, the stablecoin has reestablished its peg to the dollar each time.


In contrast, USD Coin has only dipped below $1 twice since its inception in 2018. It fell to $0.97 during the March 2020 "COVID-19 crash" and then quickly recovered to $1. It then fell back to $0.98 that same month.

Crypto investors have gained confidence in USDC primarily because Circle operates as a money services company and is registered with FinCEN and 46 other state regulators in the US. Therefore, the company reports its reserves to the authorities, as required by the money transfer laws.


In addition, Circle is audited by Grant Thornton, one of the world's leading accounting firms.

In this context:  After the surprising resignation of the economy minister: Premiums for USD stablecoins in Argentina


Paolo Ardoino, Tether's technical lead, pledged in June to have the reserves fully audited by one of the top 12 accounting firms. Accounting firm MHA provides quarterly statements of Tether reserves.

By then, USDC could well overtake USDT, especially as demand for stablecoins remains high amid the global economic turmoil .

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