Circle’s USDC stablecoin, the world’s second-largest stablecoin, has experienced a decline in its circulating supply over the past week, raising concerns about its ability to maintain its position in the market. With redemptions surpassing issuance, questions arise regarding USDC’s stability and long-term prospects. Meanwhile, competitors such as Tether have been making strides, solidifying their leading positions and capitalizing on USDC’s diminishing market share.
Decreasing USDC Supply Raises Concerns:
Over the course of the past week, USDC’s circulating supply has decreased by approximately $100 million, contributing to an ongoing downward trend. In the previous month, $4.6 billion was redeemed, while only $3.6 billion in new stablecoins were issued. This year-long contraction has resulted in a reduction of around $28 billion from USDC’s market capitalization. Notably, USDC faced a significant supply contraction of $10 billion in March, triggered by investor concerns over Circle’s exposure to a Silicon Valley bank.
Tether Gains Ground as USDC Struggles:
While USDC faces decreasing supply, its main competitor, Tether, has been steadily strengthening its position in the stablecoin market. On-chain data reveals a surge of approximately $17.8 billion in USDT circulation over the past year, with substantial growth occurring in 2023. During the same week that USDC’s supply decreased by $100 million, the total amount of USDT in circulation expanded by $22 million. Tether’s market dominance has consistently exceeded 8% throughout the year, while USDC’s market share slipped below 5% in January and currently hovers around 2.3%.
Competition from Smaller Stablecoins:
While Circle and Tether maintain a near-duopoly in the stablecoin market, smaller competitors are vying for market share and diversifying the stablecoin landscape. Last month, Dai surpassed BUSD to become the third-largest stablecoin, while TrueUSD (TUSD) supply exceeded $3 billion. Notably, the emergence of decentralized stablecoins, such as USDD on the TRON blockchain, poses potential competition. TRON’s support for decentralized stablecoins aligns with its strategic vision for the network, leveraging its faster and more cost-effective transactions compared to Ethereum. The TRX network currently hosts the highest amount of USDT among all chains, with over $44 billion USDT as TRC20 tokens.
Circle’s USDC stablecoin is grappling with a decreasing circulating supply, as redemptions outpace issuance. As USDC’s market share diminishes, competitors like Tether are capitalizing on the opportunity, solidifying their dominance in the stablecoin market. The emergence of smaller stablecoins and the growth of decentralized stablecoins on platforms like TRON further add to the evolving landscape. Circle and Tether’s continued dominance is not guaranteed, and the stablecoin market is likely to witness further competition and innovation as blockchain platforms and regulations continue to evolve.