Following Binance’s recent decision affecting USDC and Circle’s decisions regarding Tornado Cash, Tether looks set to secure dominance in its USDT, thanks in part to the company’s various efforts to increase its transparency.
Tether poised to secure dominance over Circle?
While theCircle’s USDC gained ground on theUSDT from Tetherits main competitor and market leader, almost continuously since the Terra affair, it could once again find itself in difficulty.
Circle’s progress in the stablecoin market then was due to many factors, including the questioning of the ability of Tether to secure its stablecoin with its equivalent in fiat currency. However, since then, the company has found itself obliged to review its structure and prove its transparency. In this capacity, she recently changed firms in order to publish monthly audits and no longer quarterly as was the case before.
Additionally, Tether recently announced that it has permanently cancel its share of commercial papers, the latter representing up to now a considerable part of its reserves. In parallel, over the last 2 quarters, the issuer of USDT has increased its holdings of cash and bank deposits by around 32%.
On the contrary, things don’t seem to be improving on Circle’s side. The company has recently been accused – notably by Tether – of being overzealous towards the various regulators following its controversial decision to freeze several addresses that have interacted with it. Tornado Cash without even having received the order.
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USDC ousted from Binance
But more recently, it is the decision of Binance, the largest exchange in the world, which could harm Circle. Indeed, the platform has decided to automatically convert deposits from USDC to BUSD, its own stablecoin.
And yet, Jeremy Allairethe CEO of Circle, seems to see this with a positive eye, as he recently tweeted:
Given how limited BUSD usage is outside of Binance, this will likely benefit USDC usage as the preferred cross CEX and DEX stablecoin rail. Unless Binance can convince all their competitors to get behind BUSD. Unlikely. 6/
— Jeremy Allaire (@jerallaire) September 6, 2022
“Since BUSD usage is limited outside of Binance, this will likely benefit the use of USDC as a preferred stablecoin pathway among CEX [NDLR : exchange centralisé] and DEX [NDLR : exchange décentralisé]. Unless Binance can convince all of its competitors to join BUSD. Unlikely. »
We will notice, however, that the 24-hour trading volume is more important for BUSD of Binance than for Circle’s USDC, as shown in the screenshot below:
24-hour trading volumes for USDC and BUSDNote that once Binance’s decision is effective, either September 29USDC trading volume will de facto decline as all trading pairs including USDC will also be removed from the platform.
According Samsom MowCEO of Pixelmatic and JAN3, this is even an opportunity for the BUSD to take the place of USDC as the second stablecoin on the market:
So in summary:
- – USDC will lose AUM, volume, and mindshare
- – BUSD will gain those
- – BUSD will take USDCs place as #2
- – Binance might add fees later for BUSD minting and redemption as a defensive measure
- – USDt will remain the King of Stablecoins 👑
— Samson Mow (@Excellion) September 7, 2022
“To sum up: USDC will lose AUM [NDLR : actifs sous gestion], volume and notoriety. The BUSD will win them. BUSD will take the place of USDC as #2. Binance may add fees later for mint and redemption as a defensive measure. USDT will remain the king of stablecoins. »
An analysis which seems to be shared by Paolo Ardoinothe chief technology officer of Tether, who retweeted this thread soberly titled “the beginning of the end for USDC”.
The gap widens again between USDT and USDC
Finally, beyond the different presentations of each, the figures also seem to decide in favor of Tether for the future.
Indeed, the market capitalization gap between the 2 giants had narrowed considerably following the Terra affair which had caused a momentary drop in the USDT, so much so that the difference in capitalization between the USDC and the USDT was not then more than 10 billion dollars.
The fall had been brutal for USDT, to the point that its capitalization fell from $83 billion at the start of May to just over $65 billion at the start of June. This had benefited Circle’s USDCwhich had seen its capitalization increase from 48 billion to almost 56 billion dollars over the same period.
But things have since changed, with USDC’s capitalization seeing a downward curve since the start of July, where USDT has been seeing a rally since the start of August. At the time of writing these lines, these are $16 billion of capitalization which now separate the 2 stablecoins.
Also, in view of the various elements that we have mentioned here, the gap between the USDT and the USDC seems set to widen again, and this in favor of USDT from Tether, but this time with BUSD as a new serious competitor.
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