According to a recent study report by Coinbase (COIN), Circle’s USDC, the second-largest stablecoin by market cap, is making a comeback as a result of rising global liquidity and fast adoption outside of the United States. This has led to a substantial increase in supply in recent months.
Analysts David Duong and Li Liu stated, “Since December 1, 2023, the supply of USDC has increased by 14.3% or over $3.5B, taking its total market cap to $28B compared to a smaller 8.7% growth for USDT over the same period.” With a $98 billion market capitalization, USDT, Tether’s rival dollar-based stablecoin, is by far the largest.
With the introduction of spot bitcoin ETFs in the United States, the authors noted, “crypto has entered a new phase of its market cycle, contributing to fresh capital inflows,” and this has resulted in an overall pickup in both retail and institutional demand, which is reflected in USDC’s increased liquidity. Cryptocurrency that is primarily based on the US dollar is known as a stablecoin, however it can also be backed by other assets like gold.
According to the paper, USDC is also becoming more prevalent in non-US markets. It has been noted that the stablecoin has five times increased its share of spot and derivatives activity, however it still only accounts for 4% of worldwide centralised exchange volumes
The research also stated that the launch of Coinbase’s foreign exchange and the relisting of USDC trading pairs on competitor exchange Binance late last year were major factors in the increase in liquidity, in addition to the spot ETF catalyst. Coinbase backs Circle, the company that is issuing USDC.