USDC gained in market cap. On the other hand, USDT slipped many dollars post the fiasco of UST. Stablecoins are the crypto ecosystem’s crucial part. It bridges conventional currencies and crypto trading. They are seen to contribute to over 90% of the total cryptocurrency transactional volume on an everyday basis. It received broad adoption mainly due to the fact that it is stable. This is because stablecoin is pegged to some external asset mostly. Yet stablecoin received many types of flak previously. Recently it intensified as algorithmic stablecoinTerraUSD saw a downfall. Market participants like the stablecoin’ non-volatile nature. It is mainly during high volatility periods and uncertainty where profits from cryptocurrency are especially moved into stablecoins waiting for the perfect buying opportunity. Bitcoin currently is well on the track to registering any loss for the 8th consecutive week. There is negativity that surrounds the ecosystem of the stablecoin. So it is the right time for discussing the most prevalent stablecoins safety in this market.
Tether
- It is a leading stablecoin in the market of crypto. You can buy Tether or any other Crypto coin on Bitcoin smart.
- It has a market cap of $74 billion.
- Tether is the most transacted stablecoin.
- It is considered to be the safest stablecoin.
- Tether has not failed in processing a USDT redemption request at $1 per USDT token value from 2015.
- If a de-peg takes place, it will never mean USDT is not backed by 1-1 with reserves or that the peg is lost, or that redemptions of Tether are getting processed at below $1 each USDT.
- It will indicate that selling pressure on crypto exchanges dried up all liquidity.
- If the liquidity of the exchange is very low, investors will come to Tether for requesting redemption.
- On the 11th and 12th of May, the USDT price deviated from the typical $1 price on some exchanges.
- It caused all investors to buy USDT on such exchanges for some discount.
- Then redeem those tokens of USDT with Tether on a one-one basis for a gain.
- From 11th May, Tether has reported that it processed USDR redemptions of $7 billion successfully for some verified individuals.
- This redemption size earned all investors’ trust and explicitly showed the USDT’s capability of handling redemptions.
USD coin
- It is the second biggest stablecoin.
- USD Coin has a $52 market cap.
- USDT has been riddled with investigations and lawsuits.
- It is claiming that it is never backed fully by reserve assets.
- Yet stablecoins such as USD coin is issued by reliable organizations that are more transparent.
- It is backed by USD 1:1 and is managed by the exact people running the second largest exchange Coinbase.
- Last year in August, the group that was founded by Coinbase and Circle, the Center Consortium for helping USDC management, declared that USDC can only get backed by Treasuries and cash.
- This move came after last year’s July attestation report displayed that it was holding over a quarter of the reserves in deposit certificates, commercial papers or corporate bonds.
- Reserves fully back USDC.
- Such reserves are verified by independent auditors too.
- A venture fund was launched in November too by Circle.
- It has hopes of building payment products for becoming more than only a stablecoin firm.
- This firm too valued the company Concord Acquisition Corporation at $9 billion by landing a SPAC deal.
Conclusion
During the currency crash after the drama of UST, USDT fell hugely of its market cap. Then USDC increased its market cap to $52 billion from $48. It was not a good jump. But it shows that it might be well performing on its own to provide a tough fight to the leader of the market and become the most reliable stablecoin during such an unstable time. Regardless of the huge number of stablecoin that is backed by asset or algorithm, USDT along with USDC have a strong presence in terms of security, liquidity, and market cap. With respect to market cap, USDT is the only winner. Yet if it is about transparency, USDC is a clear winner. Investors are strongly motivated to make use of only stablecoins for trade objectives during the short term and not invest in them for interest rates of high risk. Bitcoin is and still will be the safest crypto in this market.