According to a crypto trader, the second-largest stablecoin, USDC, is in major trouble. The Fed’s hawkish stance has resulted in a sell-off in the entire crypto market. However, according to Geralt Davidson, Circle’s stablecoin is rapidly losing ground. Moreover, there is a significant slide in the stablecoin’s market cap with no sign of a recovery.
USD Coin is a stablecoin issued by Circle, which is the second-largest stablecoin by market cap. Its market cap has fallen below $50 billion.
Why USDC May Be In Trouble
Geralt Davidson highlights how the USDC supply held by the top 1% of address have steadily decreased. It highlights that the whales are dumping their USD Coins. According to Davidson, the Tornado Cash decision was a bad moment for the company. The Office of Foreign Assets Control of the US Treasury sanctioned Tornado Cash for money laundering activities. Circle, the parent company of USDC, froze all its tokens on Tornado Cash.
Unlike Circle, companies like Tether did not freeze USDT on Tornado Cash addresses. According to Davidson, this decision by Circle has led to a lack of trust in the organization.
USDC’s volume on exchanges was very close to the volume of USDT in the February of 2022. Some experts believed that USDC is set to dethrone USDT as the top stablecoin by October 10th, 2022. However, currently, the second largest stablecoin is nowhere close to competing with USDT. USDT’s market cap currently stands close to $68 billion while USDC’s stands at $49.7 billion.
Recently, USD Coin suffered a major blow as Binance delisted USDC from its platform and stopped its deposit. Instead, the platform offered to convert its users’ USD Coin to BUSD in a 1:1 ratio. India’s largest crypto exchange, WazirX, followed Binance in delisting USDC.
With the Fed continuing to opt for hawkish measures, the lack of trust in USDC can be trouble for the stablecoin.
Will Circle Support CBDCs?
The compliance by USDC in the Tornado Cash has led critics to state that USDC will support Central Bank Digital Currencies. Santiago Velez, the co-founder of Block Digital, has similar views. Moreover, he believes that there is no way that FDIC, Federal Reserve, and OCC will give any competitive advantage to the USD Coin without the support of CBDCs.