The market dominance of dollar-pegged stablecoins has shifted somewhat over the past year. While most of them are in a downtrend, Tether, according to data from CoinGecko, it has recovered to record highs.
Over the past 12 months, Circle's USD Coin, At the time of writing, its market share has dropped from 34.88% to 23.05%. Binance Dollar Market Participation, During the same period, it plummeted from 11.68% to 4.18%, while Dai, The cryptocurrency market share was 3.66%, down from 4.05% in May 2022.
Meanwhile, Tether's USDT is making progress. The stablecoin's market dominance now stands at 65.89%, compared to 47.04% a year ago. Its market capitalization has soared to $83.1 billion, while USDC's market capitalization has dropped from a peak of $55 billion to just $29 billion.
In a recent interview with Bloomberg, Circle CEO Jeremy Allaire blamed the US regulator's crackdown on cryptocurrencies for the stablecoin's market cap decline. The current environment in the US appears to be working in Tether's favor. The US banking crisis led to the decoupling of USDC in March, as $3.3 billion worth of reserves were trapped at Silicon Valley Bank, one of three crypto-friendly banks shut down by regulators. Despite Circle's assurances, the market reacted quickly to the news, resulting in USDC depegging from the US dollar .Stablecoins are growing in popularity as the crypto space becomes increasingly connected to traditional finance. A recent report by the European Systemic Risk Council highlighted the need for greater transparency in digital asset markets, especially stablecoin reserves.
Tether has been heavily criticized over the past few years for its lack of transparency. The cryptocurrency firm, owned by Hong Kong-based iFinex, was fined $18.5 million by the New York attorney general's office in 2021 for allegedly misrepresenting the fiat backing of its reserves .As part of the settlement, stablecoin issuers will also be required to provide greater financial transparency.
Tether's leadership pushed back against the negative allegations on Twitter. Additionally, the company is looking to reduce its exposure to the banking system following the collapse of Silicon Valley Bank. Its latest audit report showed that Tether withdrew more than $4.5 billion from banks in the first quarter of 2023, resulting in a "substantial reduction" in counterparty risk amid continued uncertainty in the global economy. The company also boosted its US Treasury bills to a new high of more than $53 billion, or 64% of its reserves. Combined with other assets, USDT is now backed by 85% cash, cash equivalents, and short-term deposits, the report said.
Circle has made a similar move. The stablecoin operator has reportedly adjusted its reserves to reduce risk from macroeconomic uncertainty and is no longer holding U.S. Treasury bonds maturing after early June.
