Changes in the Stablecoin Market Landscape: USDC Rises in the Decentralized Finance Field

In 2021, the stablecoin market showed new competitive dynamics. Although USDT still dominates exchanges, USDC has gained a leading edge in the DeFi market, with various data indicating that DeFi users prefer USDC. At the same time, stablecoins are no longer just tools for crypto users to hedge against risks; they have also become an important compliance channel for traditional finance to enter the crypto and DeFi markets.

Stablecoins have always been a focal point in the cryptocurrency market, playing an important role with a relatively centralized mechanism in the decentralized cryptocurrency space, especially in the trading and transfer scenarios of centralized exchanges, helping users reduce asset volatility risks and stabilize returns.

The status of stablecoins has been recognized by US regulatory authorities. In January of this year, the Office of the Comptroller of the Currency allowed US banks to use USD stablecoins for payments and settlements, including issuing stablecoins and exchanging them for fiat currency.

In this year's strong cryptocurrency market, the demand for stablecoins as the main settlement asset has surged, with the issuance increasing from 28 billion USD at the beginning of the year to 108.1 billion USD now.

In recent years, the market has been anticipating that a new stablecoin could replace USDT's leading position and reduce potential risks. Although compliant stablecoins like USDC have challenged it, USDT still dominates centralized exchanges due to user habits.

In May of this year, the issuer of USDT disclosed detailed reserve data for the first time, showing that nearly 76% is in cash or cash equivalents. The security of USDT has been preliminarily ensured, but its market position has changed. Currently, the total issuance of USDT is 64.3 billion USD, accounting for about 58% of the stablecoin market, down from 75% at the beginning of the year, mainly due to the explosive growth of the Decentralized Finance (DeFi) market.

In the DeFi market, for compliance and security reasons, most projects prefer to use ETH and USDC to establish liquidity pools for trading pairs. USDC has become the preferred stablecoin for DeFi users and projects.

Data shows that in a certain DEX liquidity pool, the locked amount of USDC is 3.34 billion USD, which is twice that of USDT. In terms of trading volume, the trading pair of USDC reached 6.02 billion USD, more than three times that of USDT. On a certain lending platform, both the deposits and loans of USDC far exceed those of USDT. This reflects the significant position of USDC in the Decentralized Finance ecosystem.

USDC is striving to become the main channel for traditional finance to enter the crypto and Decentralized Finance markets. Its issuer has always focused on compliance and has obtained regulatory licenses in multiple countries and regions. In March this year, a major payment giant announced that it would allow transactions to be settled using USDC.

In May, the issuer of USDC secured $440 million in financing, the highest single financing amount in the cryptocurrency industry. This accelerated the market promotion aimed at financial institutions to build native digital currency payment and financial infrastructure.

In June, multiple institutions launched USDC savings products with an annualized return of approximately 4%. At the same time, they also introduced a DeFi API, allowing institutional users to easily access various DeFi protocols. This lowers the barriers for traditional financial users to enter the DeFi market and is expected to attract a significant influx of capital.

Under multiple demand drivers, this year the supply of USDC has soared from 1.3 billion USD to 25.1 billion USD. In the future, it will also be issued on multiple blockchain networks, further expanding its advantages.

The current landscape of stablecoins in the cryptocurrency market is becoming clearer: USDT and USDC are the dual core drivers, with USDT mainly serving centralized exchanges, while USDC attempts to become a bridge between traditional finance and the crypto world. Other stablecoins like DAI and BUSD have their specific use cases.

As the cryptocurrency market matures, the role of stablecoins is becoming increasingly important. USDC has become a benchmark in this field and drives development, similar to how a certain exchange has become the most influential exchange due to compliance.