By Tim Hakki
6 min read
USD Coin (USDC) holders had a long weekend, but fans of several other stablecoins saw a sudden, dramatic spike in the market capitalizations of their favorite projects.
On Friday night, Circle, the company behind USDC, the world’s second-largest stablecoin by market cap, fell from its dollar peg to $0.87 after the company disclosed it held some $3.3 billion in cash reserves in the now-collapsed Silicon Valley Bank (SVB).
Circle was quick to assure people that this exposure was minimal, after all, the total amount of cash the company held in SVB was less than 10% of the $42.1 billion cash reserves underpinning the value of USDC.
On Monday, intervention from both U.S. and British regulators contributed to restoring public confidence in Circle. Today, the stablecoin is trading only a fraction of a cent from its peg.
Despite the recovery, several competitors have already capitalized on Circle’s brief wobble.
Historically speaking, Tether has been the most controversial stablecoin issuer on this list and, by the same token, USDT gained the least over the weekend.
Back in 2021, Alex Mashinsky, the then-CEO of now-bankrupt crypto lender Celsius, told the Financial Times that Tether was minting USDT against Bitcoin and Ethereum collateral for certain big customers, in direct contravention of Tether’s own terms.
That year, Tether was hit with a $41 million fine by the Commodity Futures Trading Commission (CFTC)—an independent watchdog of the U.S. government that regulates derivatives—for lying about its cash reserves and not having sufficiently backed USDT for most of the period between June 1, 2016, to February 25, 2019.
Since then, Tether has worked to improve its transparency, and in August 2022, it hired accounting firm BDO Italia to produce regular attestation reports for its USDT reserves.
When Silvergate and Silicon Valley Bank collapsed last week, Tether CEO Paulo Ardoino told followers on Twitter that the company had no exposure to either.
How much it gained: USDT had a market cap of $71.9 billion on Friday. By Monday night that figure had blown up to nearly $75 billion before retreating to $73.1 billion at the time of writing, an overall increase of 1.6% over the period examined.
How it’s backed: According to the latest published auditor’s report, dated December 2022, 82% of its reserves are held in “Cash & Cash Equivalent & Other Short-Term Deposits & Commercial Paper,” which largely comprises U.S. Treasury Bills (58.5% of total reserves). Cash and bank deposits only make up 8% of the total, with the remainder spread between money market funds, reverse repurchase agreements, non-U.S. Treasury Bills, and other assets.
DAI’s supply is maintained and regulated by the Maker, which is one of the decentralized finance's (DeFi) longest-standing projects.
DAI is backed by cryptocurrencies—mainly USDC, although other Ethereum-based cryptocurrencies can be used to mint it, including Ethereum and Wrapped Bitcoin (WBTC). Due to the decentralized nature of much of its collateral as well as the fact that the protocol overseeing the stablecoin isn't manned by a single company, it's often termed a decentralized stablecoin.
It is currently the fourth largest stablecoin on the market with a market capitalization of $6.2 billion.
How much it gained: DAI had a market cap of $4.9 billion through most of Friday. By Monday morning, that figure ballooned 28.6% to $6.3 billion and has managed to hold the fort to today. DAI was likely a popular destination for people looking to jettison USDC. As people burned USDC en mass, DAI’s supply mooned, but DAI also depegged over the weekend, sinking to a low of $0.88 on Saturday, in near-perfect synchronicity with USDC.
How it’s backed: For every $1 of DAI, users need to deposit about $1.51 of crypto. Since the issuance is managed by a dynamic system of smart contracts, if there is a swift drop in the price of ETH, users will need to top up their collateral or risk getting liquidated.
TrueUSD is an Ethereum-based stablecoin that bills itself as “the first regulated stablecoin fully backed by the U.S. Dollar.”
Introduced in 2018, TUSD is backed 1:1 by nothing but cold hard fiat, according to Chainlink’s proof-of-reserve monitoring tool.
TrustToken keeps its fiat reserves in third-party bank accounts belonging to trust companies that have signed an agreement to publish monthly audits. This spread of third-party accounts reduces counterparty risk, protects token holders, and ensures that the TrustToken platform itself doesn’t have direct access to the funds, increasing consumer trust.
Last month, when the United States Securities and Exchange Commission began preparing a lawsuit against Paxos, the issuer of Binance’s dollar-pegged BUSD stablecoin, the popular exchange minted $180 million in TUSD as an alternative. This would account for the eye-watering 114.5% increase in TUSD’s market cap over the last thirty days.
TrueUSD was, however, hit by exposure to the now-collapsed crypto bank Silvergate.
TUSD minting and redemptions were paused for “a small number” of Signature Bank users but continued “unaffected” across the rest of TrueUSD’s banking network, according to a tweet on Monday by the project.
How much it gained: For virtually all of Friday, TUSD’s market cap was around $1.3 billion. For the last two days, it has been sitting comfortably above $2 billion, after increasing its market cap by 53.8%.
How it’s backed: TUSD’s circulating supply of $2,024,213,471 is currently backed by fiat bank reserves of $2,032,505,442, according to real-time proof of reserves.
If you know how DAI works, then you already know how Liquity works. It operates under many of the same mechanics, like overcollateralized loans using native cryptocurrencies, but with the added carrot of interest-free loans. Liquity charges a small one-time fee upfront, rather than variable interest rates on the loans.
LUSD is the dollar-pegged native token of DeFi lending protocol Liquity. Users receive loans paid out in LUSD by locking up their Ethereum as collateral.
After the dust had cleared on Monday following the crypto banking crisis and Circle’s depegging, Liquity CEO Michael Svoboda took some time to promote his stablecoin by retweeting droves of LUSD fans.
How much it gained: On Friday, LUSD had a market cap of around $230 million. This blew up 10.4% over the weekend and today it trades at $256.2 million.
How it’s backed: Liquity users receive loans of LUSD by locking up their Ethereum as collateral. For every $1.10 of Ethereum collateralized in a Liquity smart contract, $1 worth of LUSD is minted “under normal operation” making the collateralization ratio more favorable to borrowers than DAI.
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