Recent data from Visa, in collaboration with Allium Labs, indicates a significant shift in the stablecoin landscape. Circle's USD Coin (USDC) has surpassed Tether's USDT in transaction volume, challenging long-held assumptions about market dominance.
This analysis uses an adjusted metric designed to filter out inorganic activity and artificial inflation, providing a clearer view of genuine stablecoin usage. The findings reveal that USDC is not only growing but has become the leading stablecoin by transaction volume on the Visa network.
Understanding the Stablecoin Transaction Data
Visa's data shows that USDC accounted for over 50% of the total transaction volume within its measured crypto payments, which amount to approximately $2.5 billion. In a specific week, USDC recorded a staggering $456 billion in adjusted transaction volume, vastly outpacing USDT's $89 billion.
This is particularly notable because, by market capitalization, USDT remains the larger stablecoin. It controls about 68% of the circulating supply, compared to USDC's 20%. This apparent contradiction between circulation and usage is a key point of interest for market analysts.
Why Usage and Circulation Tell Different Stories
The discrepancy between USDT's larger supply and USDC's higher transaction volume can be explained by their primary use cases. Analysts like Noelle Acheson, author of the "Crypto Is Macro Now" newsletter, suggest that USDT is often held as a dollar-based store of value, especially in regions outside the United States.
In contrast, USDC appears to be more frequently used as a transactional currency within the U.S. This fundamental difference in purpose means that USDC changes hands more often, leading to a higher volume of transactions even with a smaller total supply.
The Role of Stablecoins in the Digital Economy
Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to a fiat currency like the U.S. dollar. They serve a critical function in the crypto ecosystem by providing a stable medium of exchange.
Their primary uses include:
- Enabling traders to move in and out of volatile crypto tokens quickly.
- Facilitating fast and low-cost cross-border payments and remittances.
- Acting as a trusted dollar-denominated asset for various decentralized finance (DeFi) applications.
The growth in transaction volume for assets like USDC signals their increasing adoption for real-world economic activities, moving beyond pure speculation. For those looking to understand the practical applications of these digital assets, it's crucial to explore more strategies for leveraging stablecoins effectively.
USDC's Resilience and Market Recovery
The journey for USDC has not been without challenges. The stablecoin faced a significant test during the 2023 U.S. banking crisis. Circle, the issuer of USDC, revealed a $3.3 billion exposure to the collapsed Silicon Valley Bank.
This news triggered a crisis of confidence, causing the circulating supply of USDC to plummet from a high of $56 billion to a low of $23 billion by December 2023. However, the market has shown strong resilience. Since then, the circulating supply has rebounded significantly to approximately $32.8 billion, demonstrating recovering trust in the asset.
Challenges in Measuring True Stablecoin Activity
Interpreting stablecoin data requires careful analysis. A major challenge is distinguishing between organic transactions initiated by human users and inorganic activity generated by automated bots or large-scale arbitrage trading.
Cuy Sheffield, Head of Crypto at Visa, highlighted this issue. When data is cleansed of bot-related activity, the perceived scale of the market changes dramatically. For example, over a 30-day period, the total transfer volume dropped from a reported $2.65 trillion to a more realistic $265 billion after filtering.
This underscores the importance of using adjusted metrics, like those from Visa and Allium Labs, to get an accurate picture of genuine economic activity within the stablecoin sector.
Frequently Asked Questions
What is the main difference between USDT and USDC?
The main difference lies in their perceived primary use case and regulatory approach. USDT (Tether) is older, has a larger market cap, and is widely used globally as a store of value. USDC (USD Coin) is often seen as a more regulatory-compliant option focused on transparent transactions within the U.S. market.
How does Visa track stablecoin transaction volume?
Visa partners with data analytics firms like Allium Labs to track on-chain transactions. They use adjusted metrics that aim to filter out duplicate transactions and inorganic bot activity to provide a clearer view of genuine user-driven volume.
Why did USDC's value drop in 2023?
USDC's circulating supply dropped dramatically in early 2023 due to its issuer, Circle, having exposure to the failed Silicon Valley Bank. This caused a temporary loss of confidence, leading to mass redemptions until the funds were confirmed to be secure.
Can stablecoin data be misleading?
Yes, raw on-chain data can be misleading because it includes a significant amount of activity from bots and automated market operations. Analytical firms now create "adjusted" volume metrics to remove this noise and better reflect real human economic activity.
What does higher transaction volume mean for a stablecoin?
Higher transaction volume typically indicates that the stablecoin is being used more frequently for actual payments and transfers, rather than simply being held. It is a strong indicator of utility and adoption as a medium of exchange.
Are stablecoins like USDC safe to use?
Safety depends on the issuer's transparency and reserves. USDC is known for its commitment to full reserve backing and regular attestations. However, as with any financial asset, users should view real-time tools and conduct their own research to understand the latest risks and regulatory developments.