USDC coin loses 20% of market capitalisation
After seeing an impressive rise following the collapse of Terra in May, Circle's dollar-pegged USDC coin has experienced a massive downfall.
The market capitalisation of Circle's USDC coin has plummeted sharply since the Tornado Cash scandal.
The stablecoin appears to have lost market share to rivals such as Binance USD (BUSD), the world's third-largest stablecoin, and Tether. Since early July, the BUSD market value has increased by 21% to $21.66 billion. Tether has risen by 3% to $68.3 billion.
USDC dropped nearly 20% of its market capitalisation last month, falling from $53.3 billion to just below $43.9 billion. Almost $5 billion of stablecoin was withdrawn in a single day (26 September), depicting a loss of roughly 9.2% of its total capitalisation.
The effects of freezing cash-linked Tornado addresses
Although the coin started to lose popularity in July, the action to freeze more than 75,000 circle coins of funds associated with 44 Tornado Cash addresses was a turning point that led to backlash and a wave of withdrawals.
Even MakerDAO, which had a significant portion of its reserves backed in USDC, viewed Circle's actions as a breach of privacy rights. The project began to discuss abandoning its reliance on the coin, arguing that given the extreme level of centralisation the coin has by nature, it could face the same consequences as the wallets connected to Tornado Cash at any time.
Even though it appeared MakerDAO was turning against the coin, they announced yesterday that a new plan to deposit USDC on Coinbase's institutional custody platform had been approved. They will escrow up to $1.6 billion in USDC reserves on Coinbase Prime to earn 1.5% in rewards.
Therefore, even the coin capitalisation keeps declining, significant projects still place bets on its potential for future recovery.
Although the current outlook for USDC is not promising, the project will likely maintain its position among the top five cryptocurrencies. However, they must regain the trust of some major exchanges and projects in the crypto community, and the compliance card may entice more players to join their ranks.
Author: Priya Kumari
Priya is a passionate content writer and the co-founder of Finendorse. She is an enthusiastic crypto investor and has a huge interest in the upcoming digitisation age.