Tether’s USDt and Circle’s USDC, the two largest stablecoins by market capitalization, have slowly lost market share in the past year, suggesting a major shift in the stablecoin landscape.
Despite Tether’s USDt (USDT) and Circle’s USDC (USDC) steadily increasing their market caps, the stablecoins have lost more than 5% of their combined market share since Oct. 2, 2024, according to data from DefiLlama and CoinGecko.
Nic Carter, industry analyst and Castle Island Ventures partner, took to X on Wednesday to address the decline of USDT and USDC dominance in a post titled “The stablecoin duopoly is ending.”
According to Carter, new issuers will be able to undercut major issuers on yield-bearing stablecoins, while banks have an opportunity to bring big industry rivals.
USDT and USDC share peaked at 91.6% in 2024
Carter noted that USDT and USDC’s dominance reached historic highs in March 2024, when the stablecoin market was worth around $140 billion.
At the time, USDT’s market cap was approximately $99 billion, while USDC had a market cap of $29 billion, together accounting for 91.6% of the entire stablecoin market cap.
Market capitalization of USDT and USDC versus total stablecoin market cap. Sources: DefiLlama, CoinGecko
“It has however fallen to 86% since its peak last year and I believe it will keep falling,” the analyst said, adding:
“The reasons are new assertiveness by intermediaries, a race to the bottom with yield, and new regulatory dynamics post-GENIUS.”
According to DefiLlama and CoinGecko, the combined market share of USDT and USDC fell further to 83.6% at the time of writing, a 5.4% drop since Oct. 2, 2024, and a 3.4% year-to-date decline.
Ethena’s USDe is the “biggest success story”
Addressing growing stablecoin competition, Carter highlighted several significant stablecoins, including Sky’s USDS (USDS), Ethena’s USDe (USDE), PayPal’s PYUSD (PYUSD) and World Liberty’s USD1 (USD1).
“I think it’s also worth paying attention to emerging names like Ondo’s USDY, Paxos’ USDG, and Agora’s AUSD,” Carter added, predicting that many other new stablecoins — including bank-issued ones — will be entering the industry soon.
Carter mentioned that many of these stablecoins are focused on providing yields, or passive income, on holding a stablecoin.
Five top yield-bearing stablecoins by market cap. Source: CoinGecko
“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,” he said.
Despite regulatory pressure on yield-bearing stablecoins introduced by the US GENIUS Act, the trend is expected to continue rising, according to Carter.
Related: USDT and USDC dominate $46B in quarterly stablecoin inflows
“Newer startups will be able to undercut the major issuers on yield and create a race to the bottom (or realistically, the top) phenomenon,” he said, adding that Circle has been working with Coinbase to introduce yields on USDC.
Bank stablecoin consortia to rival Tether
Alongside yields, Carter highlighted regulatory changes enabling banks and financial institutions to issue stablecoins.
Despite existing concerns about bank deposit runs, banks will inevitably join the industry, “for one reason or another,” he said.
Carter also noted related developments, including a stablecoin collaboration between JPMorgan and Citigroup, predicting that bank consortia “make by far the most sense.” That is because, according to Carter, “no bank individually has the ability to create the necessary distribution for a stablecoin which could compete with Tether.”
Related: Bank of England governor says stablecoins could reduce reliance on banks
Several major European banks have recently joined the emerging trend. On Sept. 25, Dutch lender ING announced a joint venture with Italy’s UniCredit and seven more banks to build a potential euro-denominated stablecoin.
Built in compliance with Europe’s Markets in Crypto-Assets Regulation (MiCA) framework, the stablecoin is expected to be issued in the second half of 2026.
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