The dominance of the US dollar-pegged stablecoin market has undergone some changes over the past year. While most of them are in a downtrend, Tether (USDT) has risen to its all-time high again, data from CoinGecko shows.
In the past 12 months, Circle's USD currency (USDC) has seen its market share decrease from 34.88% to 23.05% at the time of writing this report. Binance USD Market Share (BUSD) plummeted from 11.68% to 4.18% in the same period, while Dai (ICD) maintained its participation rate at 3.66%, compared to 4.05% in May 2022.
Tether's USDT is moving in a contrasting trend. Stablecoin market dominance currently stands at 65.89% from 47.04% a year ago. Its market capitalization soared to $83.1 billion, while USDC's market capitalization fell to $29 billion from its peak of $55 billion.
In a recent interview with Bloomberg, Circle CEO Jeremy Allaire blamed the crackdown on cryptocurrencies by US regulators by the declining market capitalization of the stablecoin. The current environment in the United States seems to be beneficial for Tether.
The US banking crisis led to the de-pegging of the USDC in March as reserves worth $3.3 billion they were stuck in Silicon Valley Bank, one of three crypto banks shut down by regulators. Despite Circle's assurances, the market was quick to respond to the news, causing the USDC to de-peg from the dollar.
With the growing connection between the crypto space and traditional finance, stablecoins have become more and more popular. A recently published report by the European Systemic Risk Board stressed the need for greater transparency in the digital asset market, specifically for stablecoin reserves.
Tether has been heavily criticized for its lack of transparency in recent years. Owned by Hong Kong-based iFinex, the crypto company was fined $18.5 million in 2021 by the New York Attorney General's Office for allegedly misrepresenting the fiduciary endorsement of its reserves. As part of the deal, the issuer of the stablecoin was also required to provide greater financial transparency.
Tether leadership has fought against negative accusations on Twitter. In addition, the company seeks to reduce your exposure to the banking system after the collapse of Silicon Valley Bank. Its latest audit report shows that Tether withdrew $4.5bn from banks in the first quarter of 2023, leading to a "substantial reduction" in counterparty risk amid ongoing global economic uncertainty.
The company also pushed its US Treasury bills to a new high of more than $53 billion, or 64% of its reserves. Combined with other assets, USDT is now backed by 85% cash, cash equivalents and short-term deposits, according to the report.
Circle has made a similar move. Stablecoin operator reportedly adjusted its reserves to mitigate risk in the face of macroeconomic uncertainty, and no longer owns Treasuries maturing after early June.
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