USDC Circulating Supply Down 38% Since Jan. 1 – Will It Affect Price?

Christian Encila

Last Updated: July 4, 2023 10:50 am

3 mins read

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USDC experienced a notable decrease in its circulating supply during the weekend, causing ripples of concern within the cryptocurrency market. According to data from CoinGecko, the stablecoin’s circulating supply dwindled by over 2%, falling from $27.9 billion on June 30 to $27.3 billion in less than 48 hours.

This sudden drop has intensified existing worries regarding the stability and long-term viability of stablecoins in the volatile world of cryptocurrencies. Since the beginning of the year, the total supply of USDC has exhibited a downward trajectory, plunging by a staggering 38%.

This continuous decline raises questions about the underlying factors contributing to the diminishing supply of USDC and its potential impact on the broader cryptocurrency ecosystem.

Declining Circulating Supply And Its Impact On USDC’s Price

The decrease in USDC’s circulating supply can have significant implications for its price and overall value. As the supply of a stablecoin decreases, its scarcity may result in increased demand from investors and traders. If the demand for USDC remains steady or rises, the reduced supply could potentially push its price higher, following the basic principles of supply and demand economics.

However, this effect may not be linear, as other factors such as market sentiment, regulatory developments, and the overall performance of the broader cryptocurrency market can also influence USDC’s price movements.

USD Coin in red in all timeframes. Source: Coingecko

Market Perception And Trust Concerns

The declining circulating supply of USDC might also trigger questions regarding the underlying reasons behind the reduction. Investors and users may question the transparency and credibility of the stablecoin’s issuer or the overall health of its backing reserves.

Any perceived lack of clarity or uncertainty could lead to reduced trust in USDC, causing some participants to seek alternative stablecoin options or even exit the market altogether. Consequently, the trustworthiness and regulatory compliance of stablecoin issuers will come under increased scrutiny, underscoring the need for greater transparency and accountability within the industry.

As of today, the market cap of cryptocurrencies stood at $1.17 trillion. Chart: TradingView.com

Regulatory Scrutiny

The dwindling supply of USDC could also attract the attention of regulators and policymakers, who are increasingly keeping a close eye on the stablecoin space. Regulators have expressed concerns about the potential systemic risks associated with stablecoins, especially those with a significant market share.

A decline in the circulating supply might amplify these concerns and prompt regulatory bodies to take more aggressive actions to oversee and regulate stablecoin operations. Increased regulatory scrutiny could introduce new compliance requirements, which may impact stablecoin issuers and the broader cryptocurrency market.

Notably in March, the stablecoin experienced a temporary detachment from its peg to the dollar, which occurred in the aftermath of multiple cryptocurrency bank failures. In response to potential liquidity challenges related to US Treasury bonds, the company behind USDC, Circle, took proactive measures.

They made the strategic choice to shift their investment focus towards short-term maturity bonds. This decision was aimed at safeguarding the stablecoin’s value and addressing concerns about the stability of its backing reserves.

(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk).

Featured image from WorldCoin

Christian Encila

They say journalists never truly clock out. But for Christian, that's not just a metaphor, it's a lifestyle. By day, he navigates the ever-shifting tides of the cryptocurrency market, wielding words like a seasoned editor and crafting articles that decipher the jargon for the masses. When the PC goes on hibernate mode, however, his pursuits take a more mechanical (and sometimes philosophical) turn.

Christian's journey with the written word began long before the age of Bitcoin. In the hallowed halls of academia, he honed his craft as a feature writer for his college paper. This early love for storytelling paved the way for a successful stint as an editor at a data engineering firm, where his first-month essay win funded a months-long supply of doggie and kitty treats – a testament to his dedication to his furry companions (more on that later).

Christian then roamed the world of journalism, working at newspapers in Canada and even South Korea. He finally settled down at a local news giant in his hometown in the Philippines for a decade, becoming a total news junkie. But then, something new caught his eye: cryptocurrency. It was like a treasure hunt mixed with storytelling - right up his alley!

So, he landed a killer gig at NewsBTC, where he's one of the go-to guys for all things crypto. He breaks down this confusing stuff into bite-sized pieces, making it easy for anyone to understand (he salutes his management team for teaching him this skill).

Think Christian's all work and no play? Not a chance! When he's not at his computer, you'll find him indulging his passion for motorbikes. A true gearhead, Christian loves tinkering with his bike and savoring the joy of the open road on his 320-cc Yamaha R3. Once a speed demon who hit 120mph (a feat he vowed never to repeat), he now prefers leisurely rides along the coast, enjoying the wind in his thinning hair.

Speaking of chill, Christian's got a crew of furry friends waiting for him at home. Two cats and a dog. He swears cats are way smarter than dogs (sorry, Grizzly), but he adores them all anyway. Apparently, watching his pets just chillin’ helps him analyze and write meticulously formatted articles even better.

Here's the thing about this guy: He works a lot, but he keeps himself fueled by enough coffee to make it through the day - and some seriously delicious (Filipino) food. He says a delectable meal is the secret ingredient to a killer article. And after a long day of crypto crusading, he unwinds with some rum (mixed with milk) while watching slapstick movies.

Looking ahead, Christian sees a bright future with NewsBTC. He says he sees himself privileged to be part of an awesome organization, sharing his expertise and passion with a community he values, and fellow editors - and bosses - he deeply respects.

So, the next time you tread into the world of cryptocurrency, remember the man behind the words – the crypto crusader, the grease monkey, and the feline philosopher, all rolled into one.

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