Metadoro: USDC is Gaining Strength to Outpace Tether

USD Coin from Circle, a technology company that develops peer-to-peer payments, is improving its positions as a leading stablecoin. Its market cap rose from $40 billion at the beginning of 2022 to almost $55 billion at the end of July. More importantly, USDC is replacing the number one stablecoin by market cap USDT (Tether) by number of daily transactions. The USDC is now largely considered to be the best safe haven stablecoin to secure digital savings.

USDC is used in 52.5% of overall daily transactions though Ethereum blockchain while Tether holds the second place with the share of 21.4%. USDC surpassed USDT by the number of transactions in late June, and it is still gaining momentum. Investors are scraping their saving in USDT and DAI in favor of USDC. 

Circle’s mobile payment platform allows users to hold, send, and receive fiat currencies. The company is licensed in New York State in the United States and in the United Kingdom. The company is rumored to have close relations with Goldman Sachs, Coinbase, and also with some large U.S. banks and regulators.

Meanwhile, the market cap of USDT deteriorated from around $80 billion at the beginning of 2022 to $65.8 by the end of July or about 42.7% of the overall stablecoin supply. Arcane Research recently forecasted that USDC may outpace Tether by market cap this October.

The cryptomarket was rocked by LUNA native coin distress as UST algorithmic stablecoin backed by LUNA plunged almost to zero in May. Even now the $154.3 billion stablecoin market has not completely recovered as it lost 18.8% of its overall capitalisation in the second quarter of 2022. 

The International Monetary fund (IMF) has warned that the cryptomarket may face further selling pressure and more failures of coin offerings, including stablecoins. “We could see further selloffs, both in crypto assets and in risky asset markets, like equities,” Director of Monetary and Capital Markets of the IMF, Tobias Adrian said. A possible recession may largely contribute to a deeper deterioration of crypto assets, according to Adrian.

Indeed, the cryptomarket, along with other risky assets, has started to suffer as major central banks like the Federal Reserve (Fed) and the European Central Bank (ECB) have started to withdraw liquidity from markets in order to bring record inflation under control. The Fed has recently made another sharp action to raise its interest rates by three quarters of a percent to 2.5%, and it is unlikely to stop, although its front man Jerome Powell has said the Fed will closely monitor incoming data to make its next interest rates decision in September. However, he has not ruled out that another 75 or even 100 basis-point hike is possible.

So, monetary conditions are clearly not in favour of the cryptomarket. The Bitcoin charts signal prices may continue to go down after a possible breakthrough of $19,000 per coin. The next stop for the major cryptocurrency is at $15,000. But eventually it could go even lower to $10,000, or even to the extreme $6,000 per coin. So, it is not a proper time for the short-term investments in the cryptomarket since the bottom of the downside cycle has not yet been reached. It is likely that proper entry points may emerge in October when the Fed is likely to send out a bold signal about further interest rate hikes, while fears over a recession in the United States, or Europe may become a reality.

For the long run, some investments could be made in leading stablecoins with a diversification to other cryptocurrencies other then USDC coin. The best option would be a selection of stablecoins like Binance USD, USDD and, may be some other from the leaders of the market. Anyway, the dynamics of the risky assets represented by the Nasdaq 100 index and Fed actions. Guidance should also be closely monitored to locate the best opportunities to invest in crypto assets. Actions of large investment institutions could be another source to look for suggestions on such investments. Nevertheless, such investments are considered to be highly risky and should be exercised with minor funds and an understanding that they could be lost completely.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.