In a recent bout of market turmoil, the trading pair involving Circle’s USDC dollar and Tether’s USDT on Binance witnessed a sudden drop to $0.76 and $0.8 at UTC+8 20:00 and 20:15, respectively.
Shortly thereafter, the values swiftly normalized. A similar dip was observed on OKX, with the trading pair reaching $0.955 around 20:00.
In today’s panic drop, the USDC/USDT trading pair on Binance dropped to $0.76 and $0.8 at UTC+8 20:00 and 20:15 respectively, and then quickly returned to normal price level. The price of the trading pair also fell to $0.955 around 20:00 on OKX. https://t.co/asYaZGmJma pic.twitter.com/l0yCg2efx2
— Wu Blockchain (@WuBlockchain) January 3, 2024
This incident marks a notable departure from the stability typically associated with stablecoins. The last instance of USDC deviating from its peg occurred in March, where it hit a low of $0.87, triggering cascading depegs in other stablecoins like $DAI and $FRAX.
Circle
During 2023, $USDC market share declined from 32% to 18%. The loss of market share began after the March 2023 depeg when USDC traded at a low of $0.87 and caused cascading depegs in $DAI and $FRAX.
The depeg occurred after @Circle confirmed it held $3.3B in USDC reserves… pic.twitter.com/9ndGhIrBiG
— Bluechip (@bluechip_org) January 2, 2024
The recent depegging event followed an announcement by @Circle, confirming holdings of $3.3 billion in USDC reserves with the now-collapsing Silicon Valley Bank. While Circle did not incur any losses, the incident impacted USDC’s market share significantly.
Circle Responds With Strategic Measures To Solve The Issue
In response, Circle implemented strategic measures to address the situation, extending the use of USDC across various blockchain networks such as Polkadot, Polygon, Solana, Near, Optimism, Base, and others. Furthermore, Circle underwent a reorganization, shutting down the Centre Consortium, a collaborative venture with @Coinbase responsible for USDC governance. Post-restructuring, Circle took on the issuance and governance of USDC internally.
The stablecoin landscape also witnessed shifts in market share dynamics. Throughout 2023, the market share of $USDT surged from 48% to an impressive 70%. Tether benefited from a narrative shift that portrayed US regulators negatively, prompting users to favor stablecoins based outside the US.
Tether
During 2023, $USDT market share increased from 48% to 70%. Tether was assisted by a narrative shift that painted US regulators in a negative light, leading to users preferring stablecoins based outside the US.
Increasing market share and interest rates translated into… pic.twitter.com/gauIET9d94
— Bluechip (@bluechip_org) January 2, 2024
This growing market share and favorable interest rates translated into financial success for @Tether_to, reporting a substantial $1.48 billion in net profit in Q1 2023 and over $1 billion in operating profit in Q2 2023. The broader stablecoin ecosystem continues to evolve, navigating challenges while adapting to changing market conditions.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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