Circle's USDC Surpasses 2022 Peak, Fully Recovers From SVB Crisis as Stablecoin Growth Reaccelerates

Circle's USDC, the second-largest stablecoin on the market, rose to a record market capitalization over $56 billion this week

The second-largest stablecoin in the market, Circle's USDC, hit a record market capitalization of over $56 billion this week as stablecoin growth showed signs of reaccelerating.

According to Artemis data, USDC added $10.2 billion to its market cap over the past month, largely driven by rising Solana-based decentralized finance (DeFi) trading volumes. That compares to a $4.6 billion increase for Tether's USDT, the largest stablecoin and Circle's main competitor, during the same period. Still, USDT easily leads the stablecoin space with a $142 billion market cap.

With the latest growth spurt, USDC surpassed its 2022 peak and fully recovered from the blow it took during the U.S. regional-banking crisis of early 2023, which saw many token holders flee to USDT. At the time, a part of Circle's stablecoin reserves were held in bank deposits at Silicon Valley Bank, which suffered a bank run and led to USDC temporarily losing its peg to the U.S. dollar.

The stablecoin lost its peg again in May 2023 as a result of the banking crisis, prompting many token holders to switch over to USDT, which helped Tether reach its peak market capitalization to date.

Stablecoins are a special type of cryptocurrency that derives its value from an external asset, usually the U.S. dollar, and is designed to maintain a stable price. Both USDT and USDC are pegged to the dollar and are used extensively in crypto exchange trading, serving as a key source of liquidity. Their expanding supply is thus seen as an indicator of investor demand and the overall health of crypto markets.

After a period of tepid action in December and early January, USDT and USDC growth has accelerated in the past weeks, data shows. Previous growth spurts, such as those seen between late October to early December and October 2023 to April 2024, coincided with steep rallies in bitcoin (BTC) and altcoin prices.

While it's only one of the factors influencing crypto markets, accelerating stablecoin growth offers a positive signal for the overall market health amid macro headwinds and consolidating prices.