USDC struggled to recover from the negative effects that occurred a few weeks ago after the collapse of Silicon Valley Bank (SVB). Despite assurances about Circle’s reserves, investors continued to withdraw their assets from the stablecoin.
USDC Market Cap Dropped $10 Billion in Two Weeks
According to data from crypto data collector Coinmarketcap, USDC’s market cap has dropped by more than 5% in the last month. In just the last two weeks, it lost over $10 billion in market value. USDC’s problems worsened with the de-pegging that occurred after SVB’s collapse. The stablecoin dropped by 15% in just a few hours, causing fears that TerraUSD, which collapsed in 2022, could suffer a similar fate.
Investors began withdrawing their assets to other cryptocurrencies, causing panic in the crypto market. Exchanges like Binance and Coinbase also suspended automatic conversions of USDC on their platforms. These negative sentiments led Circle to publish a series of tweets assuring investors that their assets were safe.
Fortunately, the Federal Reserve rescued SVB and provided a bailout fund, allowing Circle to access $3 billion worth of reserves trapped in the failed bank. Since then, USDC’s peg has returned to $1. However, damage has been done, and investor confidence is at an all-time low.
Tether (USDT): The Biggest Winner in Stablecoin Wars
With USDC’s problems, the biggest winner among rival stablecoins was Tether (USDT). While USDC’s market cap dropped, USDT saw a significant increase in market value in recent weeks.
The leading stablecoin increased its market dominance, supported by USDC’s problems, to over 60% for the first time since 2021. Unsurprisingly, most of the assets withdrawn from USDC were sent to USDT to protect against potential liquidation.
USDT also benefited from the uncertainty behind rival stabilcoin BUSD. In early February, Binance-backed stablecoin issuer Paxos was ordered by the SEC to stop minting, causing a significant drop in BUSD’s market cap and a significant increase in USDT’s volume.
Tether’s CTO, Paolo Ardoino, said the company expects to make $700 million in profit in the first quarter. This huge amount makes the USDT issuer’s excess reserves over $1.6 billion.
Another significant winner, TrueUSD (TUSD), doubled its market value since the beginning of the year. However, despite these movements, USDC remains the second-largest stablecoin with a market cap of $32 billion at the time of writing. It remains to be seen whether USDC will recover and challenge USDT’s position as the top stablecoin in the coming weeks.
