USDT

Tether vs. USD Coin on-chain data reveals two very different stablecoins

The market cap of Tether dropped amid the FTX fiasco while USD Coin supply increased by $2 billion.

USD Coin (USDC), a stablecoin issued by the U.S.-based Circle Financials Ltd, is taking the lead over its top rival, Tether (USDT), when it comes to institutional adoption, according to on-chain data.

USDC daily transfer volumes are higher

The market capitalization of USDC tokens in circulation comes to be around $44 billion versus USDT’s $65.42 billion. However, USDC’s daily transfer value on the Ethereum blockchain has been consistently higher than USDT throughout 2022, data from Glassnode shows.

For instance, as of Nov. 22, the USDC daily transfer was around $14 billion compared to USDT’s $5 billion.

USDC vs. USDT daily transfer volume. Source: Glassnode

In other words, USDC users engage in 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, crypto exchanges, etc.

Related: 82% of Tether reserves held in ‘extremely liquid’ assets, according to attestation

Furthermore, USDC leads USDT in terms of its supply weight across smart contracts as of Nov. 22. Notably, the former made up 33.75% of the total stablecoin supply locked across staking pools. In comparison, USDT’s supply is around 12.50%.

USDC vs. USDC supply in smart contracts. Source: Glassnode

But the higher daily transaction count versus USDC suggests that Tether is more likely used for retail trading and transfers such as remittances.

USDC vs. USDT daily transaction count. Source: Glassnode

On the other hand, USDC appears like a top stablecoin choice for tech-savvy institutional traders that lock their funds in staking contracts to earn yield.

This is further reflected in USDC’s lower daily active addresses count of 40,245 versus USDT’s 73,000, as recorded on Nov. 21.

USDC vs. USDT daily active addresses. Source: Glassnode

Additionally, crypto trading platforms implementing so-called “proof-of-reserves” after the FTX collapse appear to hold more Tether over the USD Coin, further signaling that USDT is likely more popular among retail traders.

These exchanges include Binance, KuCoin, BitFinex, ByBit, OKEx, and Huobi. Crypto.com’s reserves are the exception with more USDC than USDT.

Crypto.com’s proof of reserves. Source: CoinMarketCap.com

Tether market cap dips after FTX collapse

The market capitalization of USDT dropped by nearly $4 billion after the FTX exchange collapse nearly two weeks ago.

The reason may be due to Tether briefly veering off from its $1 valuation, hitting 96 cents on Nov. 10, after it froze $46 million worth of USDT tokens associated with FTX.

Interestingly, the USDC market cap rose by nearly $2 billion after Nov. 10 when the FTX fiasco began.

USDT vs. USDC market cap performance in the last six months. Source: Messari

Tether has a history of breaking its dollar peg during extreme market stress albeit to a lesser degree in recent years.

For instance, the token dropped below 95 cents during the crypto market selloff in May, coinciding with a spike in USDC’s market cap. This suggests that some investors moved their capital from Tether to USD Coin as the former lost its dollar peg, as shown below.

USDT/USDC three-day price chart. Source: TradingView

However, Tether returned to dollar parity within a few days, asserting that the tokens in circulation are backed 100% by reserves and pegged 1-to-1 with dollars. 

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Major stablecoins destabilized as market volatility and redemptions surge

Nearly all major stablecoins lost their U.S. dollar pegs amid the FTX saga, but most have recovered again as markets stabilize.

Plunging cryptocurrency prices are not the only consequence of this week’s FTX-induced crypto contagion. 

Significant market volatility this week induced by the collapse of the FTX exchange has impacted stablecoins with many of them depegging temporarily.

According to CryptoQuant senior analyst Julio Moreno, nearly all leading stablecoins have experienced some level of peg volatility this week.

The world’s dominant stablecoin, Tether (USDT) temporarily declined to $0.97 on Nov. 10 as redemptions surpassed $600 million over the past two days, he noted.

CoinGecko currently reports that USDT is still slightly below its peg, trading at $0.998 at the time of writing.

Cointelegraph reported the Tether depegging incident citing evidence that FTX and sister company Alameda Research were attempting to short USDT.

Circle’s USD Coin (USDC) has not been immune from the volatility either, as redemptions topped $1 billion. The stablecoin fell to $0.977 very briefly yesterday but rapidly regained its peg, according to CoinGecko.

TrueUSD (TUSD) redemptions barely surpassed $1 million, Moreno noted, but that didn’t prevent a depegging to $0.98 yesterday. The Pax Dollar (USDP) stablecoin dropped as low as $0.96 as redemptions hit $100 million, he noted.

There was some volatility for the Binance stablecoin, BinanceUSD (BUSD), on the Gemini exchange, resulting in a brief dip to $0.98.

Tron’s algorithmic USDD stablecoin is still way off its peg, currently trading at $0.973, according to CoinGecko. It fell as low as $0.952 yesterday at peak volatility.

Concerns over the collateral backing the stablecoin are rising as Tron (TRX), which is used to redeem USDD, has tanked 12% since the beginning of the week. Justin Sun also accused FTX and Alameda of shorting USDD.

The de-pegging incidents coincided with a slew of stablecoins leaving the FTX exchange on Nov. 10.

Related: FTX crisis feeds the Twitter rumor mill with hot takes and conspiracy theories

At the time of writing, most major stablecoins including USDC, BUSD, USDP, GUSD and TUSD had returned to their U.S. dollar peg, meaning market participants fearing another Terra-type stablecoin collapse can breathe easy again for now.

Markets have recovered marginally from yesterday’s rout with a 5% gain in total capitalization which was back over $900 billion once again.

Report: Tether freezes $46M of FTX’s USDT, setting new precedent

Tether has thus far only frozen USDT funds held in private wallets when requested by law enforcement.

According to blockchain transaction data provided by WhaleAlert.io on Nov. 10, Tether appears to have frozen 46,360,701 USDT ($46,274,472) owned by troubled cryptocurrency exchange FTX in its Tron blockchain wallet. The move comes one day after the U.S. Securities and Exchange Commission and the U.S. Justice Department began investigating FTX over its liquidity crisis. 

A spokesperson from Tether stated on Oct. 11 that the firm only freezes privately held wallets when it firm receives a legitimate request from a verified law enforcement agent to do so and that “we do not freeze wallets of exchanges or services.” If confirmed, the freeze imposed against FTX’s wallet would be the first of its kind. The same day, Japanese authorities ordered FTX to halt operations in the country after the exchange halted withdrawals.

Update Nov. 10, 15:45 UTC: A Tether spokesperson to whom Cointelegraph reached out to stated: “While we cannot specifically comment, Tether routinely has an open dialogue with law enforcement agencies, including the U.S. Department of Justice, as part of our commitment to cooperation, transparency, and accountability.”

“Amid rumors of insolvency at crypto exchange FTX and worries about the financial conditions of Alameda Research, we would like to first and foremost, act as a mouthpiece for the entire crypto ecosystem and reiterate that one crisis does not make an industry.”

In response to multiple unconfirmed rumors that Tether held USDT exposure to the ailing exchange, the spokesperson reiterated that Tether has no credit towards FTX nor its affiliate trading firm Alameda Research. “Tether tokens are 100% backed by our reserves, and the assets that are backing the reserves exceed the liabilities. Tether holds a strong, conservative, and liquid portfolio, which includes cash, cash equivalents, and U.S. treasuries,” the source said, adding: “Tether will continue to focus on safeguarding those reserves.”

This is a developing news story and will be updated accordingly.

Report: Tether freezes $46M of FTX’s USDT, setting new precedent

Tether has thus far only frozen USDT funds held in private wallets when requested by law enforcement.

According to blockchain transaction data provided by WhaleAlert on Nov. 10, Tether appears to have frozen 46,360,701 USDT (USDT) ($46,274,472) owned by troubled cryptocurrency exchange FTX in its Tron blockchain wallet. The move comes one day after the United States Securities and Exchange Commission and the U.S. Justice Department began investigating FTX over its liquidity crisis. 

A spokesperson from Tether stated on Oct. 11 that the firm only freezes privately held wallets when it receives a legitimate request from a verified law enforcement agent to do so and that “we do not freeze wallets of exchanges or services.” If confirmed, the freeze imposed against FTX’s wallet would be the first of its kind. The same day, Japanese authorities ordered FTX to halt operations in the country after the exchange halted withdrawals.

Update (Nov. 10, 3:45 pm UTC): A Tether spokesperson to whom Cointelegraph reached out stated: “While we cannot specifically comment, Tether routinely has an open dialogue with law enforcement agencies, including the U.S. Department of Justice, as part of our commitment to cooperation, transparency and accountability.”

“Amid rumors of insolvency at crypto exchange FTX and worries about the financial conditions of Alameda Research, we would like to first and foremost, act as a mouthpiece for the entire crypto ecosystem and reiterate that one crisis does not make an industry.”

In response to multiple unconfirmed rumors that Tether held USDT exposure to the ailing exchange, the spokesperson reiterated that Tether has no credit toward FTX nor its affiliate trading firm, Alameda Research. “Tether tokens are 100% backed by our reserves, and the assets that are backing the reserves exceed the liabilities. Tether holds a strong, conservative and liquid portfolio, which includes cash, cash equivalents and U.S. treasuries,” the source said, adding: “Tether will continue to focus on safeguarding those reserves.”

This is a developing story, and further information will be added as it becomes available.

Analysts urge calm as Tether depegs from USD, Bitcoin loses $17K rebound

Tether follows Tron’s USDD stablecoin in coming unstuck amid suspicions of shorting involving FTX and Alameda Research.

Bitcoin (BTC) and crypto markets saw fresh volatility on Nov. 10 after stablecoin Tether (USDT) unpegged from the United States dollar.

USDT/USD 1-day candle chart (Binance US). Source: TradingView

Tether executive: “No issues” with USDT

Data from Cointelegraph Markets Pro and TradingView showed USDT hitting lows of $0.971 on Bitstamp on the day amid fears that the largest stablecoin by market capitalization may fall further.

Those fears were stoked by evidence of embattled exchange FTX and sister company Alameda Research attempting to short USDT.

Currently in the throws of a crisis reminiscent of the Terra debacle, both firms have fallen foul of the cryptocurrency community and beyond as regulators step up scrutiny of the industry.

The impact has been felt across crypto prices, with BTC/USD reaching more than two-year lows of $15,638 on Bitstamp.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Commenting on USDT moves on the day, chief technology officer Paolo Ardoino urged calm.

“Tether processed ~700M redemptions in last 24h. No issues. We keep going,” he confirmed in a tweet.

That message echoed Tether’s official stance already published the day prior. In a blog post, the USDT issuer stated that it did not have direct exposure to FTX or Alameda.

“Tether is completely unexposed to Alameda Research or FTX,” it read.

“Tether tokens are 100% backed by our reserves, and the assets that are backing the reserves exceed the liabilities.”

Tron DAO Reserve says it will buy 300 million USDT

Michaël van de Poppe, founder and CEO of trading firm Eight, was another among many voices calling on market participants not to overreact to the ongoing volatility.

Related: Tron’s stablecoin USDD loses dollar peg on suspected sell-off by Alameda Research

“Panic across the markets as USDT depegs a bit from USD. That always happens during these times. No need to overstress and is most likely jumping back towards 1:1,” he argued.

During Terra’s LUNA aftermath, USDT briefly wicked lower than $0.96, soon recovering its USD peg.

“The exchange rate is IRRELEVANT so long Tether is able to redeem every 1 USDT for 1 USD,” part of a tweet from popular analyst Duo Nine continued.

“Big whales will just go to Tether and get their USD at parity. Don’t be fooled! The only reason the peg will not restore is if Tether does not have 100% coverage.”

USDT/USD 1-week candle chart (Binance U.S.). Source: TradingView

Meanwhie, in a curious development, decentralized cryptocurrency reserve Tron DAO Reserve announced that it would purchase 300 million USDT on the open market.

The aim, it said in a tweet, was to “safeguard the overall blockchain industry and crypto market,” without giving further details.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

A stablecoin’s rise in market share has ignited the ‘Second Great Stablecoin War’

Since Binance announced it would auto-convert USDC, USDP and TUSD into BUSD on Sept. 6, BUSD’s share of the total stablecoin market has risen from 10.01% to 15.48%.

FTX CEO Sam Bankman-Fried (SBF) said the rise of Binance stablecoin Binance USD (BUSD) could spark the “Second Great Stablecoin War,” given how fast its market cap has surged over recent months. 

Bankman-Fried’s recent comments come a month after Binance pushed ahead with plans to auto-convert a host of stablecoins supported on its exchange into BUSD on Sept. 6, — which has seen BUSD’s share of the total stablecoin market rise since. 

BUSD’s share of the total stablecoin market has risen from 10.01% on Sept. 7 to 15.48% on Oct. 22, according to crypto data aggregator Coin Metrics.

Meanwhile, BUSD’s market cap has risen 3.3% over the last 30 days to $21.7 billion, with the stablecoin only trailing Tether USD (USDT) at $68.4 billion and USD Coin (USDC) at $43.9 billion.

Commenting on the asset’s growth following the move, the FTX CEO noted via Twitter on Oct. 23 that “Binance converts USDC –> BUSD, and we see the change in supplies,” adding “thus begins the second great stablecoin war.”

Bankman-Fried noted that the first “Stablecoin War” was fought between five stablecoins in 2018, leading to USDT and USDC as the two leaders. 

Today, USDT still holds a considerable lead with a 48% share of the stablecoin market, though it has fallen from 88% since 2020, while USDC has grown in market share from 10% to 32% in the same period. 

Binance’s stablecoin rise is even more prominent, however, growing more than 30x from 0.5% to 15.48% in the same time frame. 

SBF added that as BUSD continues to edge its way into the market as the big centralized players fight for dominance, there will likely be more projects sprouting up in the “non-fiat-backed-stablecoin space” also.

“It’ll be interesting to see what emerges from the post-Luna and post-DAI-holding-USDC. My guess is that it will be something interest bearing or otherwise with some upside,” he added.

Related: BUSD: A case study for stablecoin compliance and security

In September, Binance announced it would cease a long list of spot trading asset pairs for USDC, USDP Stablecoin (USDP) and TrueUSD (TUSD), with any users still holding the three stablecoins by Sept. 29 to have their holdings auto-converted to BUSD at a 1:1 ratio.

Binance stated that the move was a decision to enhance liquidity and capital efficiency for users. At the time, Binance said there were immediate plans to do the same to USDT, but noted that this “may change.”

Stablecoins shed $38B since May as yields plunge, projects collapse

An estimated $148.7 billion worth of stablecoins are still in circulation.

According to the latest data from DefiLlama, the overall circulation of stablecoins has decreased by approximately $38 billion since early May. There are still $148.7 billion left in circulation, with the majority consisting of Tether (USDT) ($68.2 billion), USD Coin (USDC) ($46.7 billion), Binance USD ($21.4 billion), Dai (DAI) ($6.33 billion) and the Frax stablecoin (FRAX) ($1.33 billion). 

Meanwhile, the yields on stablecoin borrowing and lending on decentralized protocols (DeFi) such as Aave have fallen sharply. Back in May, the annual variable percentage rates (APR) on Binance USD, USD Coin, and DAI loans stood around 3.5%. Their APRs have since fallen to about 1.5%. Meanwhile, their utilization rates, or the percentage of stablecoins taken out as loans versus total supplied, have also fallen to around 30% to 40%, whereas the optimal levels for the protocols are about 80%. 

Unlike fiat deposits, stablecoins deposits do not automatically accrue interest due to their decentralized structure. Instead, users must place their funds at risk by lending them out or staking them on DeFi protocols. Borrowers then put the funds to work and pay lenders interest as consideration. However, recent interest rate hikes by the U.S. Federal Reserve have made fiat-dollar interest accounts more competitive while making it more costly to borrow. By proxy, this has decreased demand for stablecoin borrowing and lending.

The collapse of projects such as algorithmic stablecoin Terra USD has also dampened confidence in the stablecoin sector. In fact, the crumbling of USTC in May accounted for nearly 50% of the $38 billion stablecoin circulation plunge since then. Another stablecoin, Acala USD (aUSD), lost its peg in August after a protocol exploit caused 3.022 billion aUSD to be minted erroneously. The community has since voted to burn the vast majority of “tainted” aUSDs, but a small portion of glitched funds are still missing and was moved off the protocol. Stablecoins also face an uncertain future on the legislative side, with a draft bill in the U.S. House of Representatives proposing to ban algorithmic stablecoins for two years. 

The community has since voted to burn the vast majority of “tainted” aUSDs, but a small portion of glitched funds are still missing and was moved off the protocol. Stablecoins also face an uncertain future on the legislative side, with a draft bill in the U.S. House of Representatives proposing to ban algorithmic stablecoins for two years. 

Tether commercial paper exposure now under $50M, says CTO

Tether is also looking to become more transparent, having hired a new accounting firm to conduct regular audit and attestation reports to ensure its stablecoin is properly backed by the USD.

Stablecoin issuer Tether (USDT) has nearly completely slashed its commercial paper holdings, with less than $50 million worth of commercial paper units as of Sept. 30, 2022.

Tether CTO Paolo Ardoino made the announcement in an Oct. 3 tweet, adding also that Tether’s United States Treasury bills increased to 58.1% of its total portfolio, up 25.1% from its Jun. 30 figure of 43.5%.

Commercial papers are short-term debt instruments issued by companies, which are often used to finance various business operations, while treasury bills are claimed to be more stable than commercial papers as they offer “zero default risk” since investors are guaranteed to at least recoup the purchase price.

In June, Tether said it was aiming to decrease commercial paper backing of USDT to “zero,” and rolled into short-maturity U.S. Treasury bills — aimed at increasing the stability of its ecosystem and USDT stablecoin.

The stablecoin issuer has also been seeking to increase transparency into its dollar reserves and backing. 

In July, it appointed European accounting firm BDO Italia as a new auditor to independently review its stablecoin reserves in a bid to improve transparency and more regularly disclose audit and attestation reports.

Last month, Tether was ordered by a United States District Court in New York to provide documents that prove the U.S. dollar 1-to-1 backing of the USDT stablecoin on Sept. 19.

As for when Tether’s transparency report will be updated, Ardoino said the deadline usually takes 45 days, but now expects its new auditor to improve this process and reduce that timeline.

Related: Tether aims to decrease commercial paper backing of USDT to zero

Tether’s plan to slash its entire commercial paper holdings by the end of 2022 is well underway, with the firm cutting down its reserves from 20 billion units as of Q1 2022 to 8.4 billion units as of Q2 2022. 

USDT is currently the largest stablecoin, with a market capitalization of $67.95 billion, the third highest of all digital assets according to CoinGecko data.

Tether commercial paper exposure now under $50M — CTO

Tether is also looking to become more transparent, having hired a new accounting firm to conduct regular audit and attestation reports to ensure its stablecoin is properly backed by USD.

Stablecoin issuer Tether has nearly completely slashed its commercial paper holdings, with less than $50 million worth of commercial paper units as of Sept. 30, 2022.

Tether chief technology officer Paolo Ardoino made the announcement in an Oct. 3 tweet, adding also that Tether’s United States Treasury bills increased to 58.1% of its total portfolio, up 25.1% from its June 30 figure of 43.5%.

Commercial papers are short-term debt instruments issued by companies, which are often used to finance various business operations, while treasury bills are claimed to be more stable than commercial papers as they offer “zero default risk” since investors are guaranteed to at least recoup the purchase price.

In June, Tether said it was aiming to decrease commercial paper backing of Tether (USDT) to “zero,” and rolled into short-maturity U.S. Treasury bills — aimed at increasing the stability of its ecosystem and USDT stablecoin.

The stablecoin issuer has also been seeking to increase transparency into its dollar reserves and backing. 

In July, it appointed European accounting firm BDO Italia as a new auditor to independently review its stablecoin reserves in a bid to improve transparency and more regularly disclose audit and attestation reports.

Last month, Tether was ordered by a United States District Court in New York to provide documents that prove the U.S. dollar 1-to-1 backing of USDT on Sept. 19.

As for when Tether’s transparency report will be updated, Ardoino said the deadline usually takes 45 days but now expects its new auditor to improve this process and reduce that timeline.

Related: Tether aims to decrease commercial paper backing of USDT to zero

Tether’s plan to slash its entire commercial paper holdings by the end of 2022 is well underway, with the firm cutting down its reserves from 20 billion units as of Q1 2022 to 8.4 billion units as of Q2 2022. 

USDT is currently the largest stablecoin, with a market capitalization of $67.95 billion, the third highest of all digital assets, according to CoinGecko data.

3 reasons why USDC stablecoin dropping below $50B market cap is Tether’s gain

The stablecoin’s top-rival Tether has witnessed growth in its market cap, on the other hand.

The market capitalization of USD Coin (USDC), a stablecoin issued by U.S.-based payment tech firm Circle, has dropped below $50 billion for the first time since January 2022.

On the weekly chart, USDC’s market cap, which reflects the number of U.S. dollar-backed tokens in circulation, fell to $49.39 billion on Sept. 26, down almost 12% from its record high of $55.88 billion, established merely three months ago. 

USDC versus USDT weekly market cap chart. Source: TradingView

In contrast, the market cap of Tether (USDT), which risked losing its top stablecoin position to USDC in May, crossed above $68 billion on Sept. 26, albeit still down 17.4% from its record high of $82.33 billion in May 2022.

The divergence between USDT and USDC shows investors’ renewed preference for the former. Let’s take a look at the factors boosting Tether as the top stablecoin.

Binance’s USDC suspension

Binance, the world’s largest cryptocurrency exchange by volume, announced earlier in September that it would convert its users’ USDC balances for its own stablecoin, Binance USD (BUSD). The conversion will commence on Sept. 29 and does not apply to USDT.

The exchange said it wants to “enhance liquidity and capital-efficiency for users” via what appears to be a forced conversion in an increasingly competitive stablecoin sector. As a result, Binance suspended spot, future and margin trading in USDC.

USDC’s market cap has plunged by $9.5 billion since the announcement.

Following Binance’s footsteps, the India-based cryptocurrency exchange also stopped deposits of USDC beginning Sept. 26.

Related: Binance: No plans to auto-convert Tether, though that ‘may change’

Whales ditch USDC after Terra fiasco

The USDC supply help by top 1% addresses (aka whales) has dropped to 88.36% in September from its year-to-date high of 93.84% in February, according to data collected by Glassnode.

USDC supply held by top 1% addresses. Source: Glassnode

Interestingly, the plunge accelerated after Terra, a $40-billion “algorithmic stablecoin” project, collapsed in May, stirring a negative sentiment toward the entire stablecoin industry.

For instance, the total market cap of all stablecoins saw the worst correction in 2022, dropping from a February high of $97.37 billion to $80.65 billion in September, according to CryptoQuant.

All stablecoins’ circulating supply. Source: CryptQuant

Tornado Cash sanctions

The USDC market cap plunge has accelerated after the U.S. Treasury imposed sanctions on crypto mixing service Tornado Cash over money laundering concerns. 

Circle responded to the sanctions by freezing all USDC wallets owned by Tornado Cash. The firm also prevented addresses that may be associated with the banned mixing service from using USDC. In contrast, Tether avoided blacklisting Tornado Cash addresses.

Independent market analyst Geralt Davidson treated Circle’s response to the Tornado Cash sanction as a cue that holding USDC is riskier compared to its stablecoin rivals.

“People now have realized there is more risk holding USDC, Circle blacklisted all the USDC on Tornado Cash addresses sanctioned by US Treasury,” he noted in August 2022, adding:

“USDC seems like the only token being blacklisted, while other ERC-20 tokens were not.”

Davidson also treated Tornado Cash as one of the reasons why USDC whales have been dumping the stablecoin in recent months.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.