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USDC Supply Shrinks by $10 Billion in March, But Hits 6-Month High on Smart Contracts

2 mins
Updated by Ryan Boltman
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In Brief

  • USDC supply declined by $10 billion in March following its exposure to the US banking crisis.
  • However, the stablecoin use on smart contracts reached a six-month high of 42.08%.
  • Tether USDT is now the dominant stablecoin, accounting for over 60% of the market.
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In March, Circle’s USD Coin (USDC) supply shrank by over 23% to $32 billion as the stablecoin struggled with its exposure to the U.S. banking crisis.

USDC’s trouble began on March 11 when it was revealed that $3.3 billion of its reserves were held at the failed crypto-friendly bank Silicon Valley Bank. Following the news, USDC depegged to as low as $0.87 as investors trooped for its rival.

The stablecoin soon regained its peg after its issuer assured users it would cover any shortfall. But that did not restore investors’ confidence, who massively redeemed their USDC holdings, leading to a $10 billion outflow.

USDC Price Chart Depegging March 2023
USDC Chart (Source: BeInCrypto)

During that period, the issuer dealt with a malicious player who tried phishing its users. The hacker hacked the Twitter account of Circle’s chief strategy officer and head of global policy, Dante Disparte, promising a fake airdrop for affected users.

USDC Supply on Smart Contracts Touches 6-Month High

Notwithstanding the decline in supply, USDC’s use in smart contracts increased to a six-month high of 42.08%, according to Glassnode data.

USDC Supply on smart contracts March 2023
USDC Supply on Smart Contract (Source: Glassnode)

After declining in late 2022, USDC’s supply on smart contracts gained momentum amid its struggles. Confidence in the stablecoin was majorly boosted when the decentralized finance (DeFi) protocol MakerDAO approved its use as its primary reserve. The stablecoin got a further boost when it announced it would launch on the Cosmos blockchain soon.

Meanwhile, USDC is the dominant stablecoin on the two most popular Ethereum layer2 networks — Arbitrum and Optimism. USDC’s dominance on Arbitrum stands at over 60%, while that of Optimism is around 55%, according to DeFillama data.

USDT, TUSD Profits From Rival Issues

Tether USDT and TrueUSD (TUSD) are the biggest winners amid the banking crisis that rocked their rival stablecoins.

In March, USDT’s supply grew to $79 billion from around $70 billion it had recorded earlier in the month. During the period, its market dominance also rose to over 60%, according to DeFiLlama data.

USDT Supply
USDT Supply (Source: CoinMarketCap)

Meanwhile, TUSD saw its supply cross $2 billion after being heavily adopted by Binance. Its supply on exchanges also reached 73% for the first time since June 2021, according to blockchain analytical firm Santiment.

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Oluwapelumi Adejumo
Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.