Even some stablecoins are suffering during the crypto winter. In just a few weeks, Circle’s USDC has lost billions of dollars in capitalization. Since the Tornado Cash scandal, the market capitalization of Circle’s USDC stablecoin has plummeted dramatically.
USD Coin (USDC) lost nearly 20% of its market capitalization last month, from £45.87 billion to just under £37.7 billion. Almost £4.3 billion USDC was withdrawn in a single day (September 26), representing a loss of nearly 9.2% of its total capitalization.
This would be the most severe contraction in USDC history. The market capitalization of the stablecoin peaked in July at £48.04 billion. Although USDC’s presence began to dwindle in July, the decision to freeze over 75,000 USDC of funds linked to 44 Tornado Cash addresses was a watershed moment, causing the stablecoin to lose community support, resulting in a backlash and mass withdrawals.
Even MakerDAO, which had a significant portion of its reserves backed in USDC, saw Circle’s actions as violating privacy rights. The project began to discuss abandoning its reliance on USDC, arguing that given the extreme level of centralization that USDC has by nature, it could suffer the same fate as the wallets linked to Tornado Cash at any time.
While everything appeared to point to MakerDAO turning against USDC, they announced yesterday that they had approved a new proposal to deposit USDC on Coinbase’s institutional custody platform, escrowing up to £1.37 billion of their USDC reserves on Coinbase Prime to generate 1.5% in rewards.
So, even as USDC’s capitalization continues to fall, significant projects are still betting on its future recovery. Another challenge USDC faces Binance’s ongoing battle for stablecoin market dominance. The world’s largest cryptocurrency exchange wants to dethrone USDC and replace it with USDT as the second most valuable stablecoin on the market.
BUSD currently has a market capitalization of £18.61 billion. Unlike USDC, Binance’s native stablecoin has grown steadily by more than 22% since August 12, rising from £15.18 billion to over £18.61 billion.
Although the current outlook for USDC is not promising, the project will likely maintain its position among the top five cryptocurrencies. However, they must regain the trust of some significant exchanges and projects in the cryptocurrency community, and the compliance card is likely to attract more players to its camp.