The on-chain data for Tether vs. USD Coin reveals two very different stable coins

Key points:

• The market capitalization of USDC tokens in circulation is about $44 billion, compared to USDT’s $65.42 billion.
• USDC appears to be the main stablecoin of choice for tech-savvy institutional traders who put funds into collateralized contracts for returns.
• But a higher daily transaction volume compared to USDC indicates that Tether is more likely to be used for retail and transfers such as wire transfers.
• USDC’s active address count of 40,245 per day, while USDT recorded an active address count of 73,000 on November 21st.

USD Coin, a stablecoin issued by U.S.-based Circle Financials Ltd, is ahead of its rival Tether when it comes to institutional adoption, according to on-chain data.

Daily USDC transfer volume is high

The market capitalization of USDC tokens in circulation is about $44 billion, compared to USDT’s $65.42 billion. However, data from Glassnode shows that throughout 2022, USDC has consistently outperformed USDT in daily transfer value on the Ethereum blockchain.

For example, as of Nov. 22, USDC had about $14 billion in daily transfers, compared to USDT’s $5 billion.

In other words, USDC users made relatively more fund transfers compared to USDT users, indicating that USDC is increasingly becoming the stablecoin of choice for high-net-worth companies, including institutional whales, hedge funds, family offices, cryptocurrency exchanges, etc. 

Additionally, USDC has been leading USDT in issuance weight in smart contracts since November 22. Notably, the former accounts for 33.75% of the total stablecoin supply bonded through staking pools. In comparison, USDT’s supply is around 12.50%.

But a higher daily transaction volume compared to USDC indicates that Tether is more likely to be used for retail and transfers such as wire transfers.

USDC, on the other hand, appears to be the main stablecoin of choice for tech-savvy institutional traders who put funds into collateralized contracts for returns.

This is also reflected in USDC’s active address count of 40,245 per day, while USDT’s recorded active address count of 73,000 on November 21st.

Additionally, crypto exchanges that implemented proof-of-reserves after the FTX crash appear to hold more Tether than USD Coin, another signal that USDT may be more popular with retail traders.

These exchanges include Binance, KuCoin, BitFinex, ByBit, OKEx, and Huobi. Crypto.com reserves are the exception, with more USDC than USDT.

Tether Market Cap Falls After FTX Crash

After the FTX exchange crashed nearly two weeks ago, USDT lost nearly $4 billion in market cap.

The reason may be that Tether briefly deviated from its $1 valuation to 96 cents on Nov. 10 after freezing $46 million worth of FTX-linked USDT tokens.

Interestingly, after the start of the FTX fiasco on November 10, USDC market capitalization increased by almost $2 billion.

Tether has a history of breaking its peg to the U.S. dollar during periods of extreme market tension, although to a lesser extent in recent years.

For example, during the cryptocurrency market sell-off in May, the token fell below 95 cents, which coincided with a surge in the USDC market cap. This suggests that some investors have moved their funds from Tether to USD Coin as the former lost its peg to the U.S. dollar, as shown in the chart below.

Tether, however, restored dollar parity within days, claiming that tokens in circulation are 100% backed by reserves and pegged 1:1 to the U.S. dollar.