Circle’s USD Coin (USDC) market cap continues to tumble below $50 billion as whales lose confidence in the stablecoin and exchanges delist USDC amid censorship risks. After the Terra-LUNA crisis and liquidity crisis, some believed the USDC stablecoin will dethrone Tether (USDT). However, the market cap has declined from a high of $55.90 billion in July-end to $49.45 on September 26.
Stablecoins have lost shine after the Terra-LUNA crash and DeFi liquidity crisis. Also, increased regulatory burden, risky reserves backing, and censorship risks have also put severe pressure.
While Circle’s USDC stablecoin continues to lose market cap against Tether, the major reason behind the downfall is the lack of censorship resistance.
After the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned crypto mixer Tornado Cash, Circle immediately froze all USDC on Tornado Cash. This led whales to lose confidence in USDC and DeFi giants such as MakerDAO unwind USDC collateral to another censorship-resistant stablecoin.
Meanwhile, Tether didn’t freeze USDT assets and the market cap has increased since then. The USDT market cap has increased to nearly $68 billion. According, to CoinGecko, USDC circulation has dropped 5.3% in the last 30 days, whereas USDT circulation has increased 0.4% in the last 30 days.
Furthermore, Binance and WazirX have delisted USDC and will convert balances to BUSD. Binance suspended spot, future, and margin trading in USDC for increasing liquidity and capital efficiency in early September. The USDC market cap has declined since then. According to CoinGecko, Binance USD (BUSD) circulation has increased by 10% in the last 30 days.
Binance is the world’s largest crypto exchange in trading volume. Any delisting by the exchange significantly impacts the trading volume of that cryptocurrency. Even Robinhood announcing support for USDC hasn’t stopped the market cap decline.
Experts believe the stablecoin market is under liquidity risks amid the Federal Reserve’s hawkish rate hikes. Moreover, IMF warned earlier that stablecoins could lead to another crypto winter.
Meanwhile, the crypto market has moved towards other stablecoins such as USDT and BUSD as USDC’s future remains uncertain.
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