Circle’s USDC on track to topple Tether USDT as the top stablecoin in 2022

The growth of Circle’s native stablecoin USD Coin (USDC) in the last two months compared to its $66-billion rival giant Tether (USDT) is nothing short of spectacular.

USDT, USDC market cap ratio hits the lowest on record

Notably, USDC’s market capitalization has grown by 8.27% since May, reaching its highest level of $55.9 billion on July 2. In contrast, USDT has suffered an over 19% drop in its market valuation, currently treading around $66.14 billion.

USDT circulating market cap. Source: Messari

This is the closest USDC has come to challenging USDT’s supremacy in the stablecoin sector based on the diminishing gap between their market caps.

In detail, the USDT to USDC market cap ratio was above “9” in August 2020. However, in July, it dropped to 1.20, the lowest on record, as shown in the chart below.

USDT to USDC market cap ratio. Source: TradingView

At the current rate — and with less than $10 billion now separating the two stablecoins — USDC can surpass USDT by market capitalization in a few months, if not weeks. 

Interestingly, USDC has already flipped USDT regarding “real volume” atop the Ethereum blockchain.

USDT sails through doubts

Crypto investors have turned cautious since the collapse of Terra’s $40 billion “algorithmic stablecoin” project in May, fearing that the same could happen to USDT. That is primarily due to speculations that Tether’s USDT tokens are not 100% backed by cash and other traditional assets as it claims.

As a result, short sellers have boosted their bets on the possibility that USDT would soon fall below its $1-peg, with the Wall Street Journal reporting that these bearish positions could be worth “hundreds of millions” of dollars.

Paolo Ardoino, the chief technical officer at Tether, committed in June that they would have their reserves fully audited by one of the top 12 accounting firms. For now, accounting company MHA provides quarterly attestations of Tether reserves.

Everyone is talking about bearish things, but most of them haven’t left the crypto market. They’re just waiting for the bottom.#Bitcoin marketcap decreased by -70% from the top while stablecoin went down by just -11%. pic.twitter.com/dhgDzi9g2A

— Ki Young Ju (@ki_young_ju) June 30, 2022

Until that happens, USDC is on track to close the gap with USDT for a potential flippening event, particularly as stablecoin demand remains high amid global economic turmoil.

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