The stablecoin market landscape has changed significantly, with USDC rising to become the new favorite in the Decentralized Finance market.

In 2021, the stablecoin market presented a situation quite different from previous years. Although USDT still maintains its dominant position on exchanges, USDC has overtaken it in the DeFi sector. Various data indicate that USDC is particularly favored by DeFi users. At the same time, stablecoins are no longer merely tools for crypto users to avoid asset risk; they have also become an important and compliant medium for traditional financial capital to enter the crypto and DeFi markets.

Stablecoins have always been the focal point of the crypto market, playing an important role in the decentralized cryptocurrency space, especially in the trading and transfer scenarios of centralized exchanges, helping users reduce the volatility risk of crypto assets and secure returns.

The status of stablecoins has even gained recognition from U.S. regulatory agencies. In January this year, the U.S. Department of the Treasury's Office of the Comptroller of the Currency ( OCC ) announced that it allows U.S. banks to use U.S. dollar stablecoins for payments and settlements. Banks can use stablecoins to facilitate customer payment transactions on independently verified networks, including issuing stablecoins and exchanging them for fiat currency.

In this year's strong cryptocurrency market, the demand for stablecoins as a primary cryptocurrency settlement asset has surged. The total market value of stablecoins has increased from 28 billion USD at the beginning of the year to 108.1 billion USD today.

In recent years, the market has been anticipating the emergence of a new stablecoin to replace the leading position of USDT, in order to reduce potential risks. Although some compliant stablecoins have attempted to challenge USDT, due to user habits, USDT still maintains an absolute advantage on centralized exchanges.

In May of this year, the issuer of USDT disclosed its reserve data for the first time in detail. As of March 31, 2021, nearly 76% of Tether's reserves were in cash or cash equivalents, including commercial papers, trust deposits, cash, etc., while the remainder consisted of secured loans, bonds, and other investments (including Bitcoin).

The security of USDT has been initially ensured, but its market position has changed. Currently, the total issuance of USDT is 64.3 billion USD, which has nearly tripled since the beginning of the year, accounting for about 58% of the total issuance of stablecoins. At the beginning of the year, this ratio was as high as 75%, indicating that the overall dominance of USDT in the stablecoin industry is declining, largely due to the explosive growth of the DeFi market.

Since the beginning of this year, numerous emerging DeFi projects have emerged, particularly yield-generating, DEX, and lending projects. To maintain high liquidity, they have launched stablecoin liquidity mining activities, with stablecoin annualized yields once exceeding 50%, but most have now dropped to around 10%.

In the DeFi market, for compliance and security reasons, most projects prefer to use ETH and USDC to establish trading pair liquidity pools. USDT no longer has the trading depth and liquidity similar to centralized exchanges, and users now have more choices due to the AMM mechanism. Therefore, the more compliant USDC has become the preferred stablecoin for most DeFi users and project parties.

Data shows that the locked amount of USDC in a certain DEX liquidity pool is 3.34 billion USD, which is more than twice that of USDT. In terms of trading volume, the trading pair of USDC reached 6.02 billion USD, more than three times that of USDT, reflecting that users tend to prefer using USDC for trading.

On a lending platform with the highest TVL, the USDC deposit amount is $3.89 billion and the loan amount is $2.77 billion, both being the highest on that platform. In comparison, the USDT deposit amount is $0.95 billion and the loan amount is $0.82 billion, with USDC far surpassing USDT in both deposits and loans.

These data reflect that USDC has become the most favored stablecoin asset among DeFi users, playing an irreplaceable role in trading and lending activities within the DeFi ecosystem.

The development goal of USDC is not limited to the DeFi ecosystem, but also hopes to become the main channel for funds from traditional financial markets to enter the cryptocurrency and DeFi markets, challenging USDT on a higher level.

USDC has always centered its compliance as a core concept, and its issuer holds a prominent position in the industry with regulatory licenses from multiple countries and regions. Because of this, coupled with the shift in attitude from U.S. regulatory agencies this year, USDC has gained recognition from many traditional financial institutions, and its usage scenarios have significantly increased.

In June of this year, USDC-related institutions launched multiple savings yield products with a yield of around 4%. These products simplified the process for traditional financial users to enter the Decentralized Finance market, lowering the barriers to entry. It is foreseeable that this will attract a large influx of funds from the traditional financial market into the crypto market, bringing more USD liquidity to the DeFi market.

Driven by the dual demand from the DeFi market and traditional financial market, the supply of USDC has skyrocketed nearly 20 times since the beginning of the year, rising from 1.3 billion USD to 25.1 billion USD. In the coming months, USDC will also be issued on multiple blockchain networks, further expanding its advantage in the on-chain DeFi market.

Currently, the landscape of stablecoins in the cryptocurrency market has become clearer. USDT and USDC serve as the dual core drivers of market development. USDT primarily caters to trading and transfer scenarios in centralized exchanges, while USDC is dedicated to connecting the traditional financial world with the crypto world, enhancing the adoption rate of cryptocurrencies among financial institutions, and helping traditional funds enjoy DeFi services in a compliant and convenient manner.

Other stablecoins like DAI and BUSD also have their specific application scenarios and positioning. DAI primarily serves the various needs of native DeFi users, while BUSD maintains a dominant position as a stablecoin settlement asset on a certain exchange and its blockchain, and other stablecoins exist more as market supplements.

As the cryptocurrency market matures, the role of stablecoins becomes increasingly important. USDC has now become the benchmark in this field and drives development, just like a certain exchange that, although not having the highest trading volume, still becomes the most influential exchange in the market due to its compliance.