By George Ward
The supply of Circle USD Coin (USDC) tumbled by more than 23% to stay at $32 billion amid the US banking crisis, which impacted the crypto market. Meanwhile, Tether’s USDT continued its dominance over the stablecoin ecosystem by accounting for more than 60% of the market shares.
The Silicon Valley Bank (SVB) Exposure
According to market observers, USDC’s issue started after it announced that $3.3 billion worth of its reserves was stuck at the collapsed Silicon Valley Bank (SVB). After the announcement, investors moved en masse to its rival, USDT, as the stablecoin lost its $1 peg.
As the token depegged to $0.87, its issuer, Circle, swing into action. The stablecoin issuer reassured users that it has enough liquidity to cover a shortfall which ultimately sparked a revival in the value of USDC. However, the intervention by Circle did little to return investors’ confidence in the asset as they reportedly redeemed their USDC holdings triggering a $10 billion outflow.
The USDC issuer had to also deal with an attempt by a malicious attacker to phish users. The exploiter reportedly hacked the official Twitter account of Circle’s chief strategy officer, Dante Disparte, where he promised users fake airdrops.
Despite the drop in the supply of the coins, on-chain analytics platform Glassnode reported that USDC’s use in smart contracts spiked to a six-month high of 42.08%. Following its decline towards the end of last year, USDC’s supply of smart contracts saw a boost amid the struggles.
USDC also saw increased adoption after the decentralized finance (DeFi) platform, MakerDAO, listed the token as its primary reserve asset. Moreover, USDC gained another momentum after it was announced that the stablecoin would soon be launched on the Cosmos Blockchain.
USDT And TUSD Benefits From Rivals’ Troubles
USDC remains the dominant stablecoin among the Ethereum Layer-2 protocols, Arbitrum and Optimism. Its dominance on Arbitrum stands at more than 60%, while that of Optimism is close to 55%, as revealed by DeFilLama.
Meanwhile, USDT and TUSD are the biggest winners among stablecoins in the recent banking crisis. Last month, USDT’s supply jumped to $79 billion from the $70 billion recorded in February.
According to data from DeFiLlama, USDT also saw its market dominance rise to 60% in the same period. On the other hand, TUSD’s supply crossed the $2 billion mark after being listed on the Binance trading platform.
Per blockchain analytic firm, Santiment, the token collection on exchange has risen to 73% for the first time since June 2021. At the start of the year, stablecoins have come under heavy regulatory scrutiny from different jurisdictions due to the increased loss of their dollar pegs.
In addition, the growing demand for stablecoin means that the asset has become a regular medium of transaction among holders of crypto assets. However, the push for stablecoin regulations gained traction following the FTX debacle in November 2022.