<\/p>\n
Reflecting on events like the Terra collapse in the spring of 2022 and the de-pegging of USDC less than a year later might cause one to question the accuracy of the term “stablecoin.”<\/p>\n
Despite the tumult, the most popular stablecoin<\/a> token, Tether’s USDT (usdt<\/a>continued growing in market share<\/a> while competitors falter. It began the year with a market cap of $66 billion, and now exceeds $82 billion. Much of these gains seem to be directly at the expense of Circle’s stablecoin offering, USDC (usdc<\/a>), which began the year with a market cap of $44 billion but has since fallen to just under $30 billion.<\/p>\n Bitwise CIO Matt Hougan and crypto research analyst Ryan Rasmussen discussed USDC’s momentary depegging<\/a> from the dollar and its potential long-term implications in an interview with Blockworks on the 0xResearch podcast<\/a>,<\/p>\n \u201cWe at no time had real fundamental worries about how it would shake out in the end,\u201d says Hougan. “My only concern was that it would damage their reputation.” <\/p>\n Liquidity issues related to regional bank failures<\/a> were reportedly the primary cause of USDC’s brief period of instability. Hougan says he feared onlookers would assume the USDC depegging event was a crypto-native failure, like the aforementioned Terra algorithmic stablecoin meltdown<\/a>rather than a traditional financial failure. <\/p>\n \u201cThat turned out not to be the case. I think everyone has confidence in USDC, more confidence even today than they did back then because they’ve improved their collateral.”<\/p>\n \u201cBut yeah, I wish USDT wasn’t gaining market share.\u201d<\/p>\n Hougan says it’s bad for the market “when you reward opacity.” People perceived Tether as a safer place for their money, he says, \u201cbecause they couldn’t see that they couldn’t access their money. That’s terrible reasoning.<\/p>\n \u201cI wish it would go the other way. I think it will over time. I still believe in that.<\/p>\n Hougan believes institutions will become a larger part of the market. \u201cPeople want more regulated entities.\u201d<\/p>\n Rasmussen says regional bank failures and USDC’s subsequent liquidity problems did, in fact, harm its reputation. It was “a ripple effect,” he says, of Silicon Valley Bank’s<\/a> “Not so great risk management.”<\/p>\n According to Rasmussen, an important lesson was derived by Circle from the fiasco: “Spreading your capital across multiple banks as a stablecoin issuer probably makes a lot more sense” than concentrating funds in one place, “especially a regional bank.”<\/p>\n He states that USDC now holds a “huge portion” of its capital in treasuries. \u201cYou’re really getting a very similar risk profile from exposure to the traditional financial system with either stablecoin,\u201d he says.<\/p>\n Rasmussen presents factors for choosing between USDT and USDC, \u201cWhich one has less opacity? Which one has less regulatory risk?\u201d<\/p>\n \u201cUSDC wins that battle every single time.\u201d<\/p>\nMarkets are rewarding opacity<\/h2>\n