Since the collapse of Silicon Valley Bank (SVB) had a negative impact on the USD coin (USDC) Circle, the stablecoin has recorded significant outflows. This massive withdrawal from USDC shows investors have started ditching stablecoins for other assets.
according to data from crypto market-based data aggregator Coinmarketcap, the total market capitalization of USDC has fallen by more than 5% in a month. The stablecoin still remains the second largest stablecoin, but is starting to shrink in market cap.
Reasons Behind USDC’s Gradual Market Cap Drop
The massive outflow of USDC initially started with the collapse of Silicon Valley Bank, which happened while the global crypto market was still recovering from a significant decline from last year. Several events have made investors more cautious about injecting capital into digital assets.
For example, the FTX and TerraUSD and LUNA exchanges collapsed causing investors to fear the crypto market. This is part of the reason many investors continue to withdraw from USDC despite stablecoin recovery and re-pegging.
After SVB’s collapse, Circle’s market cap fell by more than 20% as the stablecoin’s cap fell from $40 billion at the end of February to $33 billion on March 30.
It is important to note that the plummet in the USDC market cap does not mean that investors are losing interest in stablecoins in general. Amid the uncertainty, Tether’s USDT, another stablecoin and competitor to USDC, has absorbed the outflow of USDC to its market capitalization.
Strong USDT Tether Market Share
While USDC’s market cap has decreased, USDT has seen massive inflows pushing its market dominance above 60%, according to DeFilama. This surge in USDT market cap occurred despite a collapse in confidence from crypto investors and an increase in regulatory oversight of stablecoins.
In February, the US Securities Exchange and Commission (SEC) ordered Paxos, the issuer of the Binance-branded stablecoin, to stop printing BUSD. While this led to a significant plummet in BUSD’s market cap, USDT remained strong amid another unfortunate stablecoin incident.
Over the past 30 days, USDT’s market capitalization has grown by nearly $10 billion. It rose from $70 billion at the end of February to $79 billion as of March 30.
Featured images from Canva.com, charts from TradingView