Tether’s USDt and Circle’s USDC, the dominant stablecoins by market cap, are witnessing a reduction in their market share, indicating a transformative change in the stablecoin domain. Despite continuing to grow their market caps, the two stablecoins have seen their collective market share shrink by more than 5% since October 2, 2024.
Nic Carter, an expert in the industry and a partner at Castle Island Ventures, recently expressed his thoughts on this shift in a post on X titled “The stablecoin duopoly is ending.”
Carter elaborated that emerging issuers are positioned to offer better rates than established giants in the yield-bearing stablecoin sector, while banks are also likely to shake things up.
Market Dynamics of USDT and USDC
Carter reported that at its zenith in March 2024, the combined market share of USDT and USDC exploded to 91.6% amid a $140 billion market value for stablecoins. Specifically, USDt’s market cap floated around $99 billion, and USDC approximately $29 billion at the time, representing a significant share of the market.
However, this figure has plummeted to 86%, and Carter anticipates a continuous decline.
“The reasons are new assertiveness by intermediaries, a race to the bottom with yield, and new regulatory dynamics post-GENIUS.”
Currently, the joint market share of USDT and USDC stands at about 83.6% as of the latest report, indicating a year-to-date drop of 3.4%.
Emergence of New Competitors
Carter also underscored some notable newcomers in the stablecoin arena, such as Sky’s USDS, Ethena’s USDe, PayPal’s PYUSD, and World Liberty’s USD1. He believes that entities like Ondo’s USDY, Paxos’ USDG, and Agora’s AUSD are set to gain traction, especially as they focus on delivering yields or passive income for stablecoin holders.
“Ethena’s USDe, which passes along the yield from crypto basis trade, is the biggest success story of the year, surging to a $14.7 billion supply.”
Carter anticipates that the rise of yield-bearing stablecoins will persist, despite the regulatory challenges posed by the GENIUS Act introduced in the U.S.
He further argued that financial institutions will eventually enter the stablecoin industry due to new regulations allowing them to issue stablecoins. Citing a recent collaboration between JPMorgan and Citigroup, he stated that bank consortia are likely to create competitive stablecoins, as a single bank would struggle to establish the necessary distribution channels to rival Tether.
