Stablecoin Market Shares Shift: USDT's Dominance Fades Amidst Rising USDC and Regulatory Pressures

Tether's (USDT) market share on centralized exchanges (CEXs) has declined from 82% to 74%, according to Kaiko data. This drop reflects increased competition from stablecoins like FDUSD and a rise in demand for compliant options like USDC, which reached a record 12% market share. Europe's MiCA regulation is driving the shift towards regulated stablecoins, prompting major exchanges to delist non-compliant ones, including USDT. USDC is positioned as a key beneficiary in this transition.

The dominance of Tether (USDT) as the go-to stablecoin on centralized exchanges (CEXs) has been on a downward trend, according to data from Kaiko. USDT's market share has dropped from 82% to 74%, reflecting increased competition from other stablecoins and a rise in demand for regulatory compliance.

One reason for this shift is the growing popularity of inverse contracts, particularly among crypto traders. These contracts, which are denominated and settled in cryptocurrency, have gained traction due to their ability to offer substantial leverage. In fact, the share of total open interest for BTC-margined inverse perpetual futures has risen from 18.2% in February to over 27% today, while ETH's share has increased to 25.81% from 16.74% in February [1].

Another factor driving the decline of USDT's market share is the increasing demand for regulatory compliance. Europe's Markets in Crypto Assets (MiCA) regulation, which aims to establish a regulatory framework for crypto assets, is expected to drive the shift towards regulated stablecoins. Consequently, major exchanges are delisting non-compliant stablecoins, including USDT, to avoid legal repercussions [2].

USD Coin (USDC) is well-positioned to benefit from this transition towards regulated stablecoins. In fact, USDC reached a record 12% market share on CEXs in May, making it the second most popular stablecoin after USDT [1].

Despite these trends, the crypto market remains volatile, and the impact of price volatility on derivative markets could amplify as the value of the margin varies with the asset's price movements. This makes them more vulnerable to liquidations [1].

Moreover, ETH staking outflows have been increasing since the beginning of March, indicating that some investors are moving their ETH away from staking platforms. This could be due to a variety of reasons, including changes in market conditions, regulatory developments, or the desire to take advantage of other investment opportunities [1].

References:

[1] Kaiko Research. (2023, May 18). Tether loses market share. https://research.kaiko.com/insights/tether-loses-market-share
[2] Yahoo Finance. (2023, May 17). Cboe to wind down spot trading business. https://finance.yahoo.com/news/cboe-winds-down-spot-trading-172651602.html

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