In brief

  • UST stablecoin lost its peg at the start of May’s crypto crash.
  • Tether’s market cap decreased.
  • USDC stablecoin’s market cap increased.

When Terra and its UST stablecoin collapsed last week in tandem with a marketwide crypto crash, things looked very shaky for crypto in general and stablecoins in particular.

But the crash produced at least one winner in terms of market cap and, potentially, reputation: USDC stablecoin.

As UST was headed for zero and USDT (Tether) was processing billions in redemptions, USDC was padding its market cap. At the start of the crash on May 8, USD Coin had a market capitalization between $48 billion and $49 billion. After an almost imperceptible dip, it began heading upward on May 11 and now sits at $52.26 billion—near its all-time high of $53.6 billion set in March.

USDC, which has emerged from the crisis as the fourth-largest cryptocurrency by market cap, is also closing the gap on the top centralized stablecoin, Tether’s USDT. Tether lost over $7 billion in market cap from its high of $83 billion on May 11. 

The trouble last week started not with centralized stablecoins USDT or USDC but with algorithmic stablecoin UST. Whereas centralized stablecoins promise an asset that is always equal to a dollar (or other fiat asset) by holding cash and (supposedly) highly liquid fiat assets in reserve, algorithmic stablecoins like Terra’s UST maintain their dollar peg via decentralized alternatives. 

In Terra’s case, holders of UST could trade in the stablecoin for a dollar’s worth of LUNA (with a few caveats). So, if UST were somehow…

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