According to a crypto trader, the second largest stablecoin, USDC, is in deep trouble. The Fed’s hawkish stance led to a sell-off across the crypto market. However, according to Geralt Davidson, Circle’s stablecoin is rapidly losing ground. Additionally, there is a significant decline in the market capitalization of the stablecoin with no signs of recovery.
USD Coin is a stablecoin issued by Circle, which is the second largest stablecoin by market capitalization. Its market cap has fallen below $50 billion.
Why USDC May Be in Trouble
Geralt Davidson points out that the supply of USDC held by the top 1% of addresses has steadily declined. He points out that the whales dump their USD coins. According to Davidson, the Tornado Cash decision was a bad time for the company. The US Treasury’s Office of Foreign Assets Control sanctioned Tornado Cash for money laundering activities. Circle, the parent company of USDC, froze all of its tokens on Tornado Cash.
Unlike Circle, companies like Tether have not frozen USDT on Tornado Cash addresses. According to Davidson, this move by Circle led to a lack of trust in the organization.
USDC volume on exchanges was very close to USDT volume in February 2022. Some experts believed that USDC was poised to overtake USDT as the top stablecoin by October 10, 2022 However, currently the second largest stablecoin is far from competing with USDT. The market capitalization of USDT currently stands at nearly $68 billion, while that of USDC stands at $49.7 billion.
Recently, USD Coin suffered a major blow when Binance pulled USDC from its platform and stopped its deposit. Instead, the platform offered to convert its users’ USD Coin to BUSD at a ratio of 1:1. India’s largest crypto exchange, WazirX, has followed Binance in delisting from USDC.
As the Fed continues to opt for hawkish measures, the lack of trust in USDC can be a problem for the stablecoin.
Will Circle support CBDCs?
USDC compliance in Tornado Cash has led critics to state that USDC will back central bank digital currencies. Santiago Velez, the co-founder of Block Digital, has similar views. Moreover, he thinks it is impossible for the FDIC, Federal Reserve, and OCC to give USD Coin a competitive advantage without the support of CBDCs.
The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.