According to the CEO of Circle, the decline in USDC’s market capitalization can be attributed to the banking crisis and regulatory issues in the US crypto industry.
Currently, USDC is the second largest stablecoin by market capitalization, with Tether (USDT) taking the top spot.
In the summer of 2022, the total value of USDC reached $56 billion. However, as of April 26, 2023, it has decreased by roughly half to $30.7 billion.
The global concerns surrounding the US banking system and the regulatory environment in the US have contributed to these challenges, according to Circle CEO Jeremy Allaire.
Circle’s problems began after the collapse of Silicon Valley Bank, which held assets worth approximately $3.3 billion for the company.
While the stablecoin should be pegged to the dollar at a ratio of 1 to 1, USDC became cheaper for over a day, dropping to $0.85, following the bank’s collapse.
The situation stabilized when Circle moved its assets to other banks and returned its money, and USDC regained its lost peg to the dollar by mid-March.
Nonetheless, investor confidence was still undermined, prompting Circle to announce a reduction in the number of USDC stablecoins in circulation at the end of March.