USDT market share jumps amid economic uncertainty, USDC shrinks

The market dominance of stablecoins pegged to the United States dollar has undergone some changes over the past year. While most of them are trending down, Tether (USDT) has climbed back to its all-time high, data from CoinGecko shows,

Over the past 12 months, Circle’s USD Coin (USDC) has seen its market share decline from 34.88% to 23.05% at the time of writing. Binance USD (BUSD) market share dropped from 11.68% to 4.18% over the same period, while Dai (DAI) held its share rate at 3.66%, down from 4.05% in May 2022.

Tether’s USDT is trending in the opposite direction. Stablecoin market dominance currently sits at 65.89%, up from 47.04% a year ago. Its market capitalization increased to $83.1 billion, while USDC’s market capitalization fell from its peak of $55 billion to $29 billion.

In a recent interview with Bloomberg, Circle CEO Jeremy Allaire blamed the crypto crackdown by United States regulators for the declining market capitalization of the stablecoin. The current environment in the United States appears to be favorable for Tether.

USDC was delisted in March due to the US banking crisis as $3.3 billion in reserves were stuck at a Silicon Valley bank, one of three crypto-friendly banks shut down by regulators. Despite Circle’s reassurance, the market reacted quickly to the news, causing USDC to decouple from the dollar.

With the growing correlation between the crypto space and traditional finance, stablecoins have become increasingly popular. A recent report released by the European Systemic Risk Board highlighted the need for greater transparency in the digital asset market, especially for stablecoin reserves.

Tether has been heavily criticized over the years for its lack of transparency. Owned by Hong Kong-based iFinex, the crypto firm was fined $18.5 million in 2021 by the New York Attorney General’s office for allegedly misrepresenting legal backing for its repository. As part of the settlement, the stablecoin issuer was also required to provide greater financial transparency.

led by tether fought Hit back against negative allegations on Twitter. Additionally, the company is seeking to reduce its exposure to the banking system following the collapse of Silicon Valley Bank. Its latest audit report shows that Tether pulled out more than $4.5 billion from banks in the first quarter of 2023, providing a “substantial reduction” in counterparty risk amid global economic uncertainty.

The company raised its US Treasury bills to a new high of more than $53 billion, or more than 64% of its reserves. Combined with other assets, USDT is now backed by 85% cash, cash equivalents and short-term deposits, according to the report.

Circle has also taken a similar step. The stablecoin operator reportedly adjusted its reserves to reduce the risk of macroeconomic uncertainty, and no longer held Treasuries moving forward from early June.

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