Circle’s USDC Remains Dominant in DeFi as Pressure Eases on the Stablecoin

USDC, the key stablecoin in decentralized finance, temporarily lost its dollar peg earlier this month after the collapse of its key banking partner.

AccessTimeIconMar 30, 2023 at 11:13 p.m. UTC
Updated Apr 3, 2023 at 3:38 p.m. UTC
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Circle-issued USDC has preserved its status as decentralized finance’s (DeFi) dominant stablecoin as the aftershocks of its key banking partner's collapse earlier this month subside, crypto analysts told CoinDesk.

USDC has regained balance in DeFi protocol Curve’s 3pool exchange pool, an important infrastructure for supporting stablecoins trading. The surge suggests that pressure has eased on the token, noted Riyad Carey, research analyst at digital asset data platform Kaiko.

The pool, which has some $440 million in assets, is an important platform within the DeFi ecosystem, where crypto investors can exchange USDT, USDC and DAI stablecoins. Curve pools also serve as an exit door during times of stress in crypto markets.

On March 10, USDC suffered from the sudden implosion of its reserve banking partner Silicon Valley Bank. The collapse rocked the stablecoin market, causing multiple tokens to temporarily deviate from their price peg, including USDC and DAI.

Anxious traders raided the pool to ditch USDC and DAI tokens and flock to the perceived safety of the largest stablecoin, tether (USDT). During the tumult, USDT’s share fell to 2.4% in the pool’s liquidity, per a Dune Analytics dashboard by Subin An, a data analyst for crypto fund Hashed.

Now, USDC makes up 36% of its assets, with DAI and USDT comprising 37% and 27% shares, respectively.

“While USDC has had some large outflows, it appears that the tide could be beginning to turn in DeFi,” Carey told CoinDesk. “Curve's 3pool has become more balanced, a sign that fear around USDC (and DAI) has begun to subside.”

Data shows that USDC has managed to maintain its dominant position in DeFi despite the crisis, Andrew Thurman, analyst at blockchain intelligence firm Nansen, explained.

According to Nansen data, USDC is still a widely used trading pair in decentralized exchange pools, and top USDC holders include DeFi protocols, bridges and decentralized autonomous organizations (DAOs).

Last week, decentralized lending protocol MakerDAO voted to confirm USDC as the top reserve asset for its DAI stablecoin.

“I'd say that its dominance might have been chipped away a bit, particularly ceding ground to tether, but it's still the largest and remains systemically important,” Thurman said.

USDT, with a $80 billion in market capitalization, has reached a 22-month high in market share on the $132 billion stablecoin market. The token is mostly used for facilitating trading on centralized exchanges.

Edited by James Rubin.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

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