USDT/USD: SVB's Collapse Confirms Tether's Dominance Over USDC

There are currently only three legitimate candidates for the stablecoin crown. The first is Tether (USDT), a stablecoin that debuted in 2014 and has since become an industry standard. The second is Circle's USDC, which has been at least slightly behind in terms of market capitalization since its 2018 launch. The third is the BUSD on Binance. These three coins represent nearly 90% of the entire market for stablecoins. Recent events in the US banking industry have, however, made the battle for stablecoin supremacy somewhat one-sided.

Lagging behind

This week, USDC experienced increased outflows as a result of its holdings of more than $3 billion at the now-defunct Silicon Valley Bank. Concerns about USDC's financial health led to the token's decoupling from the dollar. But after hearing that Silicon Valley Bank depositors would receive their funds in full, USDC's confidence in its token was partially restored and its dollar peg was reinstated.

However, it appears that the damage has already been done. On Wednesday, its primary competitor, USDT, added nearly $1bn to its market capitalization, while USDC lost the same amount, as investors opted to move their funds into an asset that they perceived to be less exposed to SVB. At $75bn, USDT's market cap is now more than double that of USDC, highlighting Tether's dominance in the market.

A comfortable position

Not only is USDC scrutiny accelerating Tether's market dominance, but so is scrutiny of Tether. The Securities and Exchange Commission is examining Binance's BUSD for allegedly violating its consumer protection regulations. Paxos, the token's issuer, ceased minting the token and "ended its relationship with Binance" last month due to the pressure. Tether appears to be in an unassailable position of dominance, as its main rivals are encountering roadblocks and it appears to have quelled concerns regarding the backing of its tokens.