Last week, Circle’s USDC stablecoin reduced its supply by nearly $100 million. According to Circle, over the seven days ending last Sunday, USDC redemptions amounted to $1.4 billion, surpassing the $1.3 billion issued in new coins.

Questions are being raised as to whether the world’s second largest stablecoin can maintain its position given such declines.

USDC supply dwindles as redemption exceeds issuance

As glaring as it is, last week’s USD trading lower is not a unique event. During the previous month, $4.6 billion was recovered, and a smaller $3.6 billion in new stablecoins were issued.

This downward trend, which extends for a year, has wiped out nearly $28 billion in USDC market capitalization.

The supply of USDC contracted by $10 billion in March alone. At the time, investor concerns about Circle’s exposure to Silicon Valley bank caused a temporary disruption in the stablecoin’s peg to the dollar.

Read more: What is a stablecoin and how does it work?

Although the turmoil was short-lived, as the US dollar fell to $0.97, the subsequent loss of market share continued.

The circle’s loss is the stable giant tether’s gain

While the supply of USDC has dwindled, Circle’s main competitor, Tether, has made great strides over the past year, consolidating its leading position. On-chain data reveals an increase of about $17.8 billion in USDT trading over the past year, with most of that growth occurring in 2023.

Furthermore, in the same week that USDC supply decreased by $100 million, the total amount of USDT in circulation expanded by $22 million.

Read more: 10 platforms that offer the best interest rate on stablecoins

USDT dominance has grown significantly in recent months and is currently over 7%. Over the past year, Tether supply as a percentage of the total market cap has repeatedly exceeded 8%.

Conversely, USDC’s market dominance fell below 5% in January and has not recovered since then, currently hovering around 2.3%.

Increased competition from smaller stablecoin rivals

Despite the waning of USDC trading, Circle and Tether’s near-monopoly in the market remains unchallenged, making up over 83% of all dollar-pegged stablecoins.

However, smaller competitors have not been deterred from playing for market share, and the stablecoin issuance scene is still evolving. Last month, Dai surpassed BUSD to become the third-largest stablecoin, while TrueUSD (TUSD) offered more than $3 billion.

Tether and Circle’s continued dominance over all blockchains is not guaranteed. For example, after launching the USDD stablecoin last year, TRON DAO prioritized support for this decentralized stablecoin as part of its strategic vision for the network.

Read more: Stablecoin laws around the world

The success of TRON could be critical because the blockchain is faster and cheaper to transact than Ethereum. The TRX network hosts more USDT than any other chain, with over $44 billion USDT in TRC20 tokens.

Most recently in March, the total value of all TRON stablecoins crossed $40 billion for the first time.