Why USDC’s market cap is half of what it was a year ago

The stablecoin issued by Circle saw its market capitalization peak in the middle of last year, but it has continued to drop following its March de-peg


Skorzewiak/Shutterstock modified by Blockworks


The market capitalization of USDC is roughly half of what it was a year ago — and sinking. 

Issued by crypto payments company Circle, USDC is a stablecoin pegged to the US dollar. With USDC reserves held in custody by BlackRock, BNY Mellon and other financial institutions, according to the company, a holder of the asset can redeem one USDC for $1.

USDC’s market capitalization peaked around $55 billion in late July 2022 and subsequently dropped to about $44 billion by early March of this year, according to data from CoinGecko. From there, it began a steeper decline triggered by the insolvency of Silicon Valley Bank, where Circle had deposited $3.3 billion of reserves. Circle later regained control of those funds after SVB received a federal bailout.

But the hiccup caused the stablecoin to de-peg temporarily to about $0.97, a scenario that led to a lasting loss in credibility for some, according to industry watchers. 

“The rapid reduction in price caused token-holders to immediately lose trust in the stability of USDC resulting in billions of dollars of redemptions in the weeks after,” said CoinShares researcher Max Shannon. “What token holders may not have realized amongst their fear and worry was that Circle handled the redemptions with ease, but also they paused withdrawals on the weekend.” 

The withdrawal halt was not due to illiquidity, but rather because of Circle’s ties to the traditional banking system, Shannon said. He added that though USDC can be used on-chain all the time, Circle is beholden to five-days-a-week business hours.

The market cap of USDC was roughly $26.7 billion Tuesday, down about 2.5% since the start of July, CoinGecko data shows. 

A Circle spokesperson did not immediately return a request for comment. 

As noted by Matteo Greco, a research analyst at Fineqia International, USDC’s main market is the US — a country where crypto players are navigating legal challenges in the absence of comprehensive regulation. 

“The strong actions perpetrated by the SEC against the digital asset space are driving investors away from the US market and consequently USDC has been hit as well,” Greco told Blockworks. 

Tether supply growth

The continued decline in USDC circulating supply and market cap can be directly attributed to stablecoin rival tether (USDT) “eating its lunch,” according to Shannon. 

Read more: Months After De-Pegging Event, USDC Continues to Lag Behind Tether

“Traders initially rotated out of their positions as they knew Tether had no custodial risk within the American banking system and did not de-peg,” he told Blockworks in an email. “But the long-term trend is increasing deep liquidity.”

USDT’s market cap was nearly $84 billion Tuesday, behind only bitcoin (BTC) and ether (ETH). That figure has grown roughly 27% from $66 billion since July 2022. 

Tether has been the outlier, as other main stablecoins — including Binance USD (BUSD) and Dai (DAI) — have seen a 50% drop, or more, from their respective record market capitalizations.

Though some have been skeptical as to how exactly, and to what extent, Tether is backed, the stablecoin’s circulating supply growth cannot be questioned, Greco said.

“Tether is fully minted on-chain and so the supply itself is tamper proof,” he noted.

Tether holds “a strong, conservative, and liquid portfolio” that comprises short-term US Treasuries, as well as cash and cash equivalents, a company spokesperson told Blockworks in March

Use cases vary

Stablecoins are chiefly used for trading, comprising the deepest liquidity pools across all major exchanges, Shannon said. They also act as a safe haven in a risk-off environment when trading alt coins, he added.

Despite the 50% decrease in supply for USDC over the past year, Greco said, USDC remains the top choice for many institutions.  

“It is strongly preferred as a bridge between the real world and the digital asset space when it comes to a regulated environment,” he said. “USDC is widely used in all those protocols that tokenize real world assets such as stocks, bonds, houses or luxury goods.”

While USDC is used mainly by the US market, USDT dominates in Asia — a region warming up to stablecoins. Tether, which has been around since 2014, is also favored by crypto natives who use it largely for daily trading and in DeFi to provide liquidity, Greco said.  

Added Greco: “It is also the preferred asset for native crypto investors to use when exiting the market and going into a neutral strategy without sending back money to a bank account.”

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