Thread 🧵: Is $USDC on track to flip $USDT?
We present a straightforward comparison between $USDT & $USDC
Year-to-date the market cap of $USDC has grown from $42B to $54B while the Crypto market cap fell from $3T to $1T
Both of them have reserves in the form of fiat currencies and other assets
Reserves enable you to redeem the "digital dollars" (stablecoins) for "real dollars"
The stablecoin market cap has grown from $1 billion to $180 billion at the peak of the market cycle
Given that all value is transferred digitally within the Crypto market, they have a very clear Product Market Fit for the Crypto market
Ever since the entire Crypto market began plummeting, there was one coin whose market cap rose despite the FUD
And that coin is $USDC
Year-to-date, the market cap of $USDC has grown from $42B to $54B, while the Crypto market cap fell from $3T to $1T
Despite the bullish performance of $USDC, $USDT has been the dominant stablecoin in the #Crypto market
As of now, the market cap of $USDT stands at ~$65B
It also has the competitive advantage of being the most liquid stablecoin with a staggering volume of $75B
$USDC has a 24h volume of 'only' $9B
But that might be due to the fact that it is not being widely used in the Perpetual derivatives market
But on the flip side, the $USDT market cap fell along with the Crypto market cap from $83 billion at its peak to $65 billion
Did you notice the bizarre situation here?
Why did "just" the market cap of $USDC increase while the rest of the crypto market, including the biggest #stablecoin, declined?
There may be compelling reasons for the smart money to move their funds into $USDC
Let's see why:
$USDC primarily focuses on building "TRUST" by guaranteeing users that every digital dollar of $USDC can always be exchanged 1:1 for cash. ALWAYS.
@circlepay is the issuer of $USDC & maintains the reserves for $USDC
@circlepay assures that every digital dollar of $USDC on the internet is 100% backed by cash and short-dated U.S. treasuries so that it’s always redeemable 1:1 for U.S. dollars
$USDC reserves are held in leading U.S. financial institutions, like BlackRock and BNY Mellon
Circle’s customers can mint/redeem $USDC instantly by opening a Circle account
~20% of the reserves are held as cash in the banks, while the rest ~80% is held as 3-month Treasury Bills
Treasury bills are one of the most liquid assets in the world, with ~$600B in volume
The $USDC reserves do not contain any other high-risk, less liquid assets such as digital assets, private equities, unsecured loans, commercial papers, or assets held with third parties that are subject to lock-ups
@circlepay is regulated as a "licensed money transmitter" under U.S. state law
This means Circle (as a licensed money transmitter) "cannot" simply lend its reserves to some Chinese company or use it for their own business expenditures like the way CeFi companies do
But why should we believe their financial statements?
The $USDC reserve statements are audited annually by a leading global accounting firm
Circle also publishes monthly attestations of the size and composition of the USDC reserves to verify whether $USDC is 100% backed
@Tether_to is an offshore corporation that issues $USDT. This implies that it does not need to abide by US regulations
Tether works the same way as $USDC does but with one exception: RESERVES
$USDT's reserves contain Cash, U.S treasury bills, Non-U.S treasury bills, Digital tokens, Secured loans, Precious metals, Commercial papers, Certificates of Deposit, etc.
Instead of having only liquid and stable assets like $USDC, $USDT opted to diversify its reserves into risky & illiquid assets
This means that if $USDT redemptions skyrocket in a short period of time, Tether might not have enough liquid assets to meet redemptions
But why would Tether hold risky assets in the reserves?
80% of $USDC's treasury bills get interest (which is low) & 20% of them get close to zero interest
But Tether wants to hold risky assets to get those juicy yields to be a profitable company
Tether also does not publish monthly attestations of their reserves, they post audits once in a while.
You will only know what assets they hold in the reserves when "they" decide to release an audit report
However, $USDC releases attestation reports every month
Here are the risks involved in $USDT:
• Risky assets held in reserves
• Lack of regulation
• Sketchy business practices
• No monthly attestation reports of reserves
The "TRUST" in the $USDT is suppressed by all of these risks
At the end of the day, the best fiat-backed stablecoin to hold ultimately comes from the one that finds the 'least' risky solution for these problems:
1. What assets does it hold in the reserves?
2. Can it handle high amounts of stablecoin redemptions immediately?
If you want a monthly report on the stablecoin issuer's reserve holdings and whether they can handle 100% of the redemptions: $USDC might be a better choice
But if you are a day trader and you want a highly liquid market to transfer your dollars immediately, then $USDT might be a better choice for you
For short-term use cases, you might be better off holding $USDT while keeping your larger investments in $USDC