Demand for USDC Stablecoin Skyrockets after FTX Collapse

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The collapse of FTX in late 2022 sent shockwaves across the cryptocurrency ecosystem, triggering a widespread reassessment of trust, transparency, and risk in digital asset markets. In the aftermath, one stablecoin has emerged as a clear beneficiary of shifting investor sentiment: USD Coin (USDC). Once playing second fiddle to Tether (USDT), USDC has seen a dramatic surge in adoption, with daily transfer volumes now outpacing its larger rival by a significant margin.

According to data from blockchain analytics firm Glassnode, USDC now records a daily transfer volume of approximately $15 billion—four to five times higher than USDT’s $3 billion. Over time, this has translated into a cumulative transfer volume advantage of over $7 trillion in favor of USDC. This trend is especially striking given that USDT still holds the title of the largest stablecoin by market capitalization.

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Why Are Investors Turning to USDC?

Stablecoins have long served as safe harbors during periods of market turbulence. With crypto prices prone to wild swings, traders and investors often move funds into dollar-pegged assets to preserve value without exiting the digital economy. But not all stablecoins are perceived equally—and in today’s climate, trust is everything.

USDC has increasingly been viewed as the more transparent and reliable option. Issued by Circle, a regulated financial services company, USDC is backed entirely by cash and short-term U.S. Treasury securities. This composition offers a high degree of liquidity and security, reinforcing confidence among institutional and retail users alike.

Circle further strengthens this trust by publishing monthly attestation reports from independent accounting firms. These audits verify that every USDC in circulation is fully backed by equivalent reserves, ensuring full transparency. For many in the crypto community, this level of accountability sets a gold standard for stablecoin operations.

The Shadow Over Tether

In contrast, Tether (USDT) has faced persistent scrutiny over the years regarding the composition and verifiability of its reserves. While Tether claims its tokens are backed by a mix of cash, cash equivalents, and other assets, questions have lingered about the quality and liquidity of those holdings.

One pivotal moment came in October 2021, when the U.S. Commodity Futures Trading Commission (CFTC) fined Tether $41 million for misleading investors about its reserve backing. The regulator found that for nearly two years, Tether failed to maintain adequate reserves for about 72% of its issued tokens—a revelation that damaged its credibility at a critical time.

Then came the FTX collapse. Although Tether publicly denied any meaningful exposure to FTX or its affiliated trading firm Alameda Research, the timing raised red flags. In November 2022, USDT briefly lost its dollar peg, dropping to as low as $0.95 amid panic-driven withdrawals and uncertainty. While it recovered quickly, the incident underscored concerns about systemic risk and counterparty dependencies.

Even today, some investors remain cautious. The lack of regular, independently verified audits comparable to Circle’s monthly reports contributes to lingering skepticism—despite Tether’s continued growth in market cap.

Trust as the New Benchmark

The shift toward USDC reflects a broader evolution in the crypto market: from pure speculation to demand for accountability. After a series of high-profile failures—including Celsius, Voyager, and Three Arrows Capital—users are prioritizing safety over convenience.

This new paradigm favors projects that embrace regulatory compliance, transparency, and real-world asset backing. USDC checks all these boxes. Its integration into major financial infrastructure, including payment platforms and decentralized finance (DeFi) protocols, further amplifies its utility and reach.

Moreover, Circle’s strategic partnerships with traditional financial institutions and its pursuit of U.S. banking charter status signal long-term ambitions beyond crypto. This institutional alignment reassures investors who see digital dollars not just as trading tools but as part of the future financial system.

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Frequently Asked Questions

Q: Is USDC safer than USDT?
A: Many investors believe so. USDC is backed solely by cash and U.S. Treasuries and undergoes monthly audits by reputable accounting firms. While USDT also claims full backing, its reserve composition includes less liquid assets, and it has faced regulatory penalties in the past.

Q: Did USDC depeg during the FTX crash?
A: Unlike USDT, USDC maintained its $1.00 peg throughout the FTX collapse. This resilience reinforced perceptions of its stability and sound reserve management.

Q: Can I use USDC outside of crypto exchanges?
A: Yes. USDC is widely used in DeFi lending platforms, cross-border payments, remittances, and even salary disbursements through fintech apps. Its interoperability across blockchains enhances its real-world usability.

Q: Who issues USDC?
A: USDC is issued by Circle, a U.S.-based financial technology company that co-founded the Centre Consortium with Coinbase to develop open standards for fiat-backed stablecoins.

Q: How often are USDC reserves audited?
A: Circle releases monthly attestation reports verified by Grant Thornton LLP, providing transparency into reserve holdings and ensuring full backing of all circulating USDC tokens.

Q: Will USDC replace USDT as the top stablecoin?
A: While USDT still leads in total supply, USDC dominates in transaction volume and trust metrics. Whether it overtakes USDT in market cap depends on sustained adoption, regulatory clarity, and continued confidence in its operations.

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The Road Ahead for Stablecoins

As the crypto market matures, stablecoins are becoming central to both decentralized and traditional finance. Their role in enabling fast settlements, reducing volatility exposure, and bridging fiat and digital economies cannot be overstated.

However, their long-term success hinges on trust—and trust must be earned through consistent transparency and regulatory adherence. In this environment, USDC’s structured approach positions it as a leader not just in performance but in principle.

Meanwhile, Tether continues to grow its market cap and expand onto new blockchains. Yet without matching Circle’s audit frequency and reserve clarity, it may struggle to win over risk-averse users in an era defined by caution.

Ultimately, the rise of USDC isn't just about one coin outperforming another—it's about a shift in values within the crypto space. Investors aren’t just chasing yield; they’re demanding integrity.

The FTX collapse was a painful lesson. But from it emerged a clearer vision: the future of money isn’t just digital—it’s accountable.

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