The circulating supply of USD Coin (USDC) has risen $70 million in the past week alone, with consistent day over day gains of millions of dollars.

As of this writing, there are 361.1 million USD Coin (USDC) in circulation. This is still only a fraction of the 1.928 billion Tether (USDT) in circulation, but it seems possible that USD Coin (USDC) could eventually overtake Tether (USDT). This is because Tether’s (USDT) reputation has been stained by serious banking issues in October and November 2018, while USD Coin (USDC) has U.S.-based bank accounts so it is unlikely to have banking problems, especially since it is operated and issued by top cryptocurrency exchanges in the United States.

USD Coin (USDC) is a stablecoin that was launched in October 2018 by the reputable U.S.-based cryptocurrency exchanges Circle and Coinbase. USD Coin (USDC) is designed to stay at parity with the U.S. dollar, and there is $1 stored in a U.S. bank account for every USD Coin (USDC) in circulation. Accounting firm Grant Thornton LLP releases monthly statements to verify this.

Since USD Coin’s (USDC) genesis in October, it has not gone more than two cents below parity, and any deviations from parity have been quickly rectified.

Tether (USDT) was the undisputed king of stablecoins from 2015 until the latter half of 2018 when a banking issue severely disrupted Bitfinex and Tether (USDT). Bitfinex is intimately tied to Tether (USDT), and they use the same bank historically. In October 2018 Tether Limited, the official company that runs Tether (USDT), and Bitfinex lost their relationship at the Noble Bank of Puerto Rico. This left Tether (USDT) with no bank account for an extended period of time.

The lack of active reserves led to Tether (USDT) becoming unpegged with the USD, and Tether (USDT) was well below $1 from early October through the end of November. On October 15 and November 4 Tether (USDT) crashed below $0.95. Simultaneously due to lack of confidence, the circulating supply of Tether (USDT) crashed from 2.8 billion to 1.7 billion.  

This provided a prime opportunity for other stablecoins to expand, with the contenders being USD Coin (USDC), Gemini Dollar (GUSD), Paxos Standard (PAX), and True USD (TUSD). Indeed, USD Coin (USDC) was launched right after the Tether (USDT) crisis started. All of these alternative stablecoins gained value during the Tether (USDT) crisis, but the only stablecoin that continues to gain ground versus Tether (USDT) is USD Coin (USDC).

Tether (USDT) was able to form a banking relationship with Deltec Bank in the Bahamas, which is why it returned to parity in early December. However, redemption fees have caused Tether (USDT) to stabilize 2-3% above parity, since there are 1-3% fees to redeem Tether (USDT).

The redemption fees make Tether (USDT) much more costly than using USD Coin (USDC), which has zero fees. Further, It is unlikely that USD Coin (USDC) would ever lose its bank account since it is operated in the United States by Circle and Coinbase, while it is uncertain if Tether’s (USDT) new banking relationship at a relatively small bank in the Bahamas will last long term.

This makes USD Coin (USDC) an obvious choice for stablecoin investors, which is probably why USD Coin (USDC) is consistently gaining on Tether (USDT) and has moved up the CoinMarketCap ranks into the top 20.

It seems possible that, eventually, USD Coin (USDC) will become the #1 stablecoin, especially if Tether (USDT) has another banking crisis.