USD Coin (USDC) Hits Two-Year Market Cap Low Amidst Banking Crisis and Rising Interest Rates

The market capitalization of the USD Coin (USDC) is presently at its lowest in two years, with experts stating that it hasn’t fully rebounded after becoming unpegged to the dollar earlier this year. CoinGecko data indicates that the value of USDC is just over $26 billion, marking its lowest since July 2021 when it was at $25.1 billion.

While USDC remains the sixth biggest cryptocurrency in terms of market cap, it has lost ground to its primary competitor, Tether (USDT), which currently has a valuation of $82.7 billion.

Last year, USDC had a market value of $56 billion, reinforcing its spot as the second-largest stablecoin. However, the market cap dipped sharply in March 2023 due to a regional banking crisis which led to the collapse of Silicon Valley Bank (SVB). At that time, it was revealed that Circle had kept more than $3 billion of USDC reserves with SVB, leading to a brief detachment from its dollar peg.

Some experts in the crypto industry believe the decline in USDC might also be attributable to rising interest rates, making it slightly less cost-effective to hold USDC compared to other financial instruments. Evgeny Gaevoy, the CEO of Wintermute, recently noted that USDC’s different issuance model, compared to USDT, might also have impacted its market cap.

The decline in USDC’s value is noteworthy, especially considering that its issuer, Circle, recently sold a minority share to cryptocurrency exchange Coinbase.

On August 21, Coinbase and Circle entered a strategic partnership, resulting in the disbandment of Centre, the consortium initially responsible for governing and issuing USDC. This decision was influenced by increasing regulatory clarity surrounding stablecoins in the U.S.

Under the new arrangement, Circle will take full charge of issuing, managing, and supplying USDC. The agreement also states that profits from USDC collateral held outside their platforms will be equally shared between Coinbase and Circle.

In addition, Circle announced plans to integrate USDC onto six additional blockchains in the coming weeks. The stablecoin is already operational on various platforms including Ethereum (ETH), Solana (SOL), Algorand (ALGO), and Avalanche (AVAX).

source