USDT and USDC Gain Momentum Following BUSD Collapse

  • Circle’s USD Coin, the second-largest stablecoin, grew over $700 million.
  • The impact of the Paxos announcement on the broader crypto market has been minimal, with bitcoin rising 14% over the past week.

Following the recent regulatory scrutiny faced by the stablecoin market, USDT, the world’s largest stablecoin, has witnessed massive growth. As reported earlier, New York-based Paxos Trust Company, which mints Binance’s stablecoin BUSD, announced it would cease issuing new tokens after US regulators labeled it an unregistered security. The move has led to investors questioning the future of stablecoins.

USDT, the market leader, has seen a significant surge in its market capitalization, adding $1.9 billion to reach $70.3 billion, while Circle’s USD Coin, the second-largest stablecoin, has also grown by over $700 million to $42 billion. Meanwhile, BUSD’s market value has shrunk from $16.1 billion to $12.9 billion, with its market share falling from 12.1% to 9.4%.

The impact of BUSD’s regulatory troubles on the broader crypto market has been minimal, with Bitcoin rising 14% to $24,902 over the past week. While some uncertainty remains on the impact of the SEC’s ruling on other stablecoins, the market appears to have adjusted.

Vetle Lunde, an analyst at Arcane Research, believes that the ruling is not expected to constitute a key big structural shift to the market at this time. However, enforcement against USDC or the non-U.S. domiciled USDT might have more far-reaching implications.

Furthermore, the buzz surrounding Binance’s stablecoin has helped increase trade volume on other exchanges as well. According to data analytics firm Kaiko, since February 1st, Binance’s bitcoin liquidity has decreased by over 30%, while Coinbase’s in the United States has increased by about 15%.

Stablecoins continue to be a driving force in the cryptocurrency industry, providing access to major and obscure crypto assets, tokens, and assets. However, the decline in BUSD’s dominant position due to regulatory issues may lead to a revival for USDT. As the market continues to shift, it remains to be seen which stablecoin will emerge as the dominant force.

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