Circle’s USDC is on track to topple Tether USDT as the best stablecoin in 2022

The growth of Circle’s native stablecoin USD Coin (USDC) over the past two months compared to its $66 billion rival giant Tether (USDT) has been nothing short of spectacular.

USDT, USDC Market Cap Ratio Hits All-Time Low

Notably, USDC’s market cap has grown 8.27% since May, reaching its all-time high of $55.9 billion on July 2. By contrast, USDT has experienced a more than 19% drop in its market valuation, which currently stands at around $66.14 billion.

This is the USDC closest to USDT’s supremacy in the stablecoin sector based on the narrowing gap between their market caps.

In detail, the market cap ratio between USDT and USDC in August 2020 was above “9”.

At the current pace – and with less than $10 billion now between the two stablecoins – USDC could surpass USDT by market cap in a few months, if not weeks.

Interestingly, USDC has already flipped USDT regarding “real volume” on top of the Ethereum blockchain.

USDT sails through doubts

Crypto investors have become cautious since the collapse of Terra’s $40 billion “algorithmic stablecoin” project in May, fearing the same could happen to USDT. That is mainly due to speculation that Tether’s USDT tokens are not 100% backed by cash and other traditional assets, as alleged.

As a result, shortsellers have raised their bets on the possibility that USDT could soon fall below the $1 peg, with the Wall Street Journal reporting that these bearish positions could be worth “hundreds of millions” of dollars.

Related: Tether Is An ‘Instrument Of Freedom’ And ‘Bitcoin Onramp,’ Says Tether CTO

These bets assume that Tether would not be able to exchange all of its USDT for one dollar in a “bank run” type scenario. As a result, people would start selling their stablecoin at a discount, breaking the link.

USDT has a history of going below or above its $1 peg during extreme market volatility, although this was more pronounced in the early days.

For example, in October 2018, the token’s value dropped to $0.85 (on Kraken) amid rumors that one of its sister companies (crypto exchange Bitfinex) is insolvent.

The same thing happened after Terra’s collapse in May, where USDT briefly plummeted to $0.97. Nevertheless, the stablecoin recovered its dollar peg every time.

By contrast, USD Coin has fallen below the usual $0.99-1 only twice since its launch in 2018. It fell to $0.97 during the “Covid Crash” in March 2020, then rebounded to $1, falling back to $0.98 in the same month.

Crypto investors have strengthened their confidence in USDC mainly because Circle functions as a money service company, registered with FinCEN and other 46 state regulators in the US. As a result, the company reports its reserves to the authorities in accordance with money transfer laws.

Circle is also audited by Grant Thornton, a leading global accounting firm.

Related: USD Stablecoin Premiums Rise in Argentina After Economy Minister Resigns

Paolo Ardoino, Tether’s technical director, promised in June that their reserves would be fully audited by one of the 12 largest accounting firms. For now, accounting firm MHA provides quarterly attestations of Tether reserves.

Everyone is talking about bearish things, but most have not left the crypto market. They just wait for the bottom.#Bitcoin marketcap fell -70% from the top, while stablecoin fell just -11%. pic.twitter.com/dhgDzi9g2A

— Ki Young Ju (@ki_young_ju) June 30, 2022

Until that happens, USDC is on track to close the gap with USDT for a potential flippening event, especially as demand for stablecoin remains high amid global economic turmoil.

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