USDT and USDC Market Share Drops to 82% as Competition Increases

The two largest stablecoins by market capitalization, Tether’s USDt and Circle’s USDC, have gradually lost market share over the past year, indicating a significant transformation in the stablecoin market.

While both Tether’s USDt (USDT) and Circle’s USDC (USDC) have experienced increases in their market caps, they have collectively seen a decline of over 5% in market share since October 2, 2024, according to data from DefiLlama and CoinGecko.

On Wednesday, Nic Carter, an industry analyst and partner at Castle Island Ventures, addressed the waning dominance of USDT and USDC in a post titled “The stablecoin duopoly is ending.”

Carter suggested that new issuers could undercut major players on yield-bearing stablecoins, while banks have the opportunity to bring in significant industry competition.

USDT and USDC market share peaked at 91.6% in 2024

Carter highlighted that the dominance of USDT and USDC reached a historic high in March 2024, when the stablecoin market was approximately $140 billion.

At that moment, USDT had a market cap near $99 billion, and USDC’s was around $29 billion, together making up 91.6% of the total stablecoin market cap.

“However, it has now dropped to 86% since its peak last year, and I believe it will continue to decrease,” the analyst remarked, adding:

“The reasons are increased assertiveness from intermediaries, a race to the bottom in yields, and new regulatory dynamics post-GENIUS.”

Current data from DefiLlama and CoinGecko shows that the combined market share of USDT and USDC has further declined to 83.6%, marking a 5.4% drop since October 2, 2024, and a 3.4% year-to-date decrease.

Ethena’s USDe is the “biggest success story”

In light of rising competition in the stablecoin sector, Carter pointed out several noteworthy stablecoins, including Sky’s USDS (USDS), Ethena’s USDe (USDE), PayPal’s PYUSD (PYUSD), and World Liberty’s USD1 (USD1).

“It’s also important to keep an eye on emerging names such as Ondo’s USDY, Paxos’ USDG, and Agora’s AUSD,” he added, forecasting that many other new stablecoins, including those issued by banks, will soon enter the space.

Carter mentioned that these new stablecoins often focus on offering yields or passive income for holders.

“Ethena’s USDe, which passes along the yield from crypto basis trade, is the standout success of the year, boasting a supply of $14.7 billion,” he stated.

Despite regulatory challenges affecting yield-bearing stablecoins due to the US GENIUS Act, Carter believes the upward trend is likely to persist.

Related: USDT and USDC dominate $46B in quarterly stablecoin inflows

“New startups have the potential to undercut major issuers on yield, leading to a race to the bottom (or realistically, the top),” he remarked, noting that Circle is collaborating with Coinbase to launch yields on USDC.

Bank stablecoin consortia poised to rival Tether

Carter highlighted that regulatory changes are enabling banks and financial institutions to create stablecoins.

Amid concerns about bank deposit runs, banks are expected to join the industry “for one reason or another,” he mentioned.

He also referenced a stablecoin collaboration between JPMorgan and Citigroup, stating that bank consortia “make the most sense.” According to Carter, “no single bank can create the necessary distribution for a stablecoin to rival Tether.”

Related: Bank of England governor states stablecoins could lessen reliance on banks

Several major European banks have recently embraced this emerging trend. On September 25, Dutch lender ING announced a partnership with Italy’s UniCredit and seven additional banks to develop a euro-denominated stablecoin.

This stablecoin, compliant with Europe’s Markets in Crypto-Assets Regulation (MiCA) framework, is anticipated to be issued in the latter half of 2026.