USD Coin (USDC), a stablecoin issued by the American company Circle Financials Ltd, is taking the lead from its main rival, Tether (USDT), as far as institutional adoption is concerned, according to on-chain data.
USDC daily transfer volume is higher
The market capitalization of USDC tokens in circulation comes out to about $44 billion versus USDT’s $65.42 billion. However, the value of daily USDC transfers on the Ethereum blockchain has been consistently higher than USDT throughout 2022, data from Glassnode shows.
For example, as of November 22, the daily transfer of USDC was around $14 billion compared to $5 billion for USDT.
In other words, USDC users make relatively higher capital transfers compared to USDT users, suggesting that USDC is increasingly the stablecoin of choice among high net worth entities, including institutional whales, hedge funds, family offices, cryptocurrency exchanges, etc.
Furthermore, USDC leads USDT in terms of its supply weight in smart contracts as of November 22. In particular, the former accounted for 33.75% of the total supply of stablecoins locked in staking pools. By comparison, the USDT bid is around 12.50%.
But the higher daily transaction count compared to USDC suggests that Tether is more likely to be used for retail trading and transfers such as remittances.
Secondly, USDC appears as one of the best stablecoin options for tech-savvy institutional traders who lock their funds in staking contracts for returns.
This is further reflected in USDC’s lower daily active address count of 40,245 vs. USDT’s 73,000, as recorded on Nov. 21.
Also, Cryptocurrency trading platforms implementing so-called proof-of-reserves after the FTX crash appear to hold more Tether than USD Coin, indicating that USDT is likely to be more popular with retail traders.
These exchanges include Binance, KuCoin, BitFinex, ByBit, OKEx, and Huobi. Crypto.com reserves are the exception with more USDC than USDT.
Tether Market Cap Drops After FTX Collapse
USDT’s market capitalization fell by almost $4 billion following the collapse of the FTX exchange nearly two weeks ago.
The reason may be because Tether briefly deviated from its $1 valuation, hitting 96 cents on Nov. 10, after it froze $46 million worth of USDT tokens associated with FTX.
Curiously, USDC’s market capitalization increased by almost $2 billion after November 10, when the FTX fiasco began.
Tether has a history of breaking its peg to the dollar during extreme market stress, albeit to a lesser degree in recent years.
For example, the token fell below 95 cents during the crypto market sell-off in May, coinciding with a rise in the USDC market capitalization. This suggests that some investors moved their capital from Tether to USD Coin as the former lost its peg to the dollar, as shown below.
However, Tether returned to dollar peg within a few days, stating that the tokens in circulation are 100% backed by reserves and pegged 1-to-1 with dollars.
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