USDC Records More Than $10 Billion Outflows Since SVB Collapse, Tether Gains Market Share

One stablecoin that has suffered the most with the US banking crisis this month is Circle’s USDC stablecoin. With the collapse of the Silicon Valley Bank (SVB), Circle’s USDC came under major trouble as SVB was a major banking partner of the stablecoin issuer.

This led to a mass panic in the crypto space and major outflows from USDC on March 10, the day SVB collapsed. As a result, the USDC stablecoin also lost its Dollar-peg making the situation worst.

Although Circle has managed the situation well with USDC retaining its Dollar-peg, the outflows from the cryptocurrency continue till date. So Far since March 10, more than $10 billion in net outflows have been recorded from the USDC stablecoin.

The digital asset’s market cap has dropped from more than $44 billion in the beginning of March 2023, to now at $33 billion. On the other hand, Tether’s USDT stablecoin has benefitted from the outflows in USDC while managing to gain a higher market share.

This month of March 2023 has been typically tough for the stablecoin market amid the uncertainties in the banking sector as well as the growing regulatory action. Binance’s BUSD stablecoin also faced a strong regulatory action with Binance ultimately deciding to end the support for stablecoin.

At $33 billion, USDC is still the second-largest stablecoin in the market. Circle says it backs its stablecoin with short-term government bonds as well as cash reserves at various US banks. After the collapse of the SVB bank, Circle managed to move all its cash reserves to the world’s largest custodian aka BNY Mellon. It also keeps some limited funds at other partners.

Despite these correction measures, the USDC stablecoin witnessed $1.5 billion in redemptions over the last week of which bankrupt crypto lender Voyager Digital alone redeemed $150 million.

On the other hand, Tether’s USDT stablecoin continue to gain market share this month. The stablecoin’s market cap surged from $70 billion to now at $80 billion. Meaning, USDT now has 60% market share in the $132 billion stablecoin market.

In the past, Tether has faced several allegations over insufficient reserves for its USDT stablecoin. In a tweet last week, Circle Chief Executive Jeremy Allaire wrote: “Ironically, the players who have had the strongest position with U.S. regulation and U.S. banking system integration, are considered ‘unsafe,’ with fears that assets could be stranded. Market participants are shifting into platforms with no oversight, totally opaque bank and risk exposures, and histories of lax financial risk and integrity controls.”

However, Tether CTO Paolo Ardoino said in his recent CNBC interview that USDT has around $1.6 billion of excess reserves.