Stablecoin activity drops after May peak

Stablecoin usage lost steam amid the recent crypto market downturn. From peaking at nearly $2 billion on May 19, the daily transaction volume has fallen off its 2021 average by about 60%. The significant drop begs the question about stablecoin activity in the current market environment.

Unsurprisingly, the two cryptocurrencies that remain in a tight race for stablecoin dominance are Tether (USDT) and USD Coin (USDC). However, the market holds a fine distinction between the two, particularly with their corresponding reserve holding.

Credit rating agency Fitch Ratings even warned recently about Tether’s risk triggering a destabilization in short-term credit markets, since its reserves are not all in cash. On the other hand, Fitch cites USDC as an example of a fully backed safe asset since it keeps the United States dollars on a one-to-one basis in custody accounts.

Stablecoin analysis

Still, users flock to Tether for a number of purposes. Data from Covalent reveals that Tether exceeded the total transactions of USDC by at least 500,000. USDT had 2.9 million total transactions from January to June while USDC had 2.4 million. But in terms of dollar volume, USDC beats Tether, $21.4 billion to $19.3 billion, respectively.

Moreover, there are some signs of institutional avoidance of Tether. Rather, institutional users seem to prefer using MakerDAO’s DAI, even though USDT has exceeded DAI’s total number of transactions and total trading volume by a long shot.