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USDC vs. USDT: Which Stablecoin is Better for You?

USDT and USDC are the two biggest stablecoins right now. Read on to find out why you should include them in your crypto portfolio and why they offer such a high yield.

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Stablecoins are a type of cryptocurrency pegged to an external reference point, such as the USD to keep the value steady and minimise fluctuations. In most cases, to ensure there are sufficient reserves to maintain the peg, stablecoins are backed by assets, such as gold or cash

Why are USD Stablecoins Popular?

With their fixed value, USD stablecoins in particular offer traders a way to enter and exit positions in more volatile cryptocurrencies as they work as a store of value. Just like how the U.S. Dollar (USD) is the world's reserve currency, with around 90% of forex trading involving the USD, it's hardly surprising that USD-backed stablecoins are the norm.

Before stablecoins, exiting a position meant traders had to go through the hassle and pay fees in order to convert their crypto assets into fiat currencies, repeating the process for every trade. 

While some exchanges offer wallets to hold USD in between trades, these are state/country-specific. If a trader’s region is unavailable, a sell order to cash out USD to a US bank account can take up to five business days, while cashing out to an EU bank account with SEPA transfer still takes a minimum of 1 working day. On top of the waiting time, there are also transaction fees for fiat withdrawal and deposits. 

With the price stability of stablecoins, a trader would be able to convert their earnings from a profitable trade into USD stablecoins like USDT and USDC while waiting for the next opportunity. Due to demand from traders and their steady store of value, stablecoins have become a way for individuals to earn passive income. By including stablecoins as part of your investment portfolio, you can enjoy high yields with Cabital's Fixed Savings plan that offers leading APY rates!

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The popularity of stablecoins is evident. Since January 2021, the demand and supply of stablecoins have skyrocketed and continues to grow steadily, exceeding a combined market cap of over $151 billion in January 2022. While every USD-backed stablecoin is worth US$1, the stablecoin you'll choose to buy is dependent on the blockchain and applications you'll be using. For example, while the Binance USD (BUSD) can be used outside of the Binance ecosystem, most of its appeal lies in its large user base on Binance and the 90+ trading pairs available on the chain.

Total Stablecoin Supply chart from The Block Jan 2022
Total Stablecoin Supply chart from The Block

Currently, two stablecoins, USDT (Tether) and USDC (USD Coin) dominate the market. They have a combined share of over 80% of the total stablecoin supply. While USDT is still holding the lion’s share of over 50%, USDC is catching up, making up nearly 30% of the total stablecoin supply.

Share of Total Stablecoin Supply chart from the Block Jan 2022
Share of Total Stablecoin Supply chart from the Block


USDT vs USDC

Both USDT and USDC are popular stablecoins, and both are pegged to the USD. However, that's where their similarities end. USDT is the most traded cryptocurrency and is slightly more widely available than USDC, while USDC has a lower trading volume, but is perceived to be a safer store of value since it's backed by cash and cash equivalents. We've put together a table with the key traits of both:

Table 1: USDT vs USDC Summary

What is USDT?

Tether’s USDT is widely recognised as the first stablecoin, where USDT stands for the symbol of Tether's USD stablecoin (also known as Tether). In terms of market capitalisation, it’s fourth overall. It was launched in 2014 as a digital token backed by fiat currency, where the USDT is pegged at 1:1 to the U.S. Dollar to ensure stability in the exchange price. Once USDT is issued, it can be transferred, spent and traded just like any cryptocurrency. Its price is permanently tethered to the value of the corresponding fiat currency in reserve

To understand how Tether works, here’s a diagram that shows the cryptocurrency’s life cycle:

Tether’s lifecycle diagram
Tether’s lifecycle diagram

Tether promises that USDT holders can exchange and redeem their tokens for USD based on Tether’s terms of service. To ensure that one-to-one backing remains constant, the balance of fiat currency held in Tether’s reserves will be equal or greater than the number of tokens in circulation. Based on Tether’s transparency balances, there is a $162 million excess of assets over liabilities at the time of writing. 

Breakdown of Tether’s Assets
Breakdown of Tether’s Assets

Based on the June 2021 consolidated report, 85% of Tether’s assets are in cash, cash equivalents, short-term deposits and commercial papers—an increase of 9% from the previously shared reserves breakdown in March 2021.

Breakdown of Tether’s Cash, Cash Equivalents, Short-Term Deposits and Commercial Paper
Breakdown of Tether’s Cash, Cash Equivalents, Short-Term Deposits and Commercial Paper

Tether’s come under fire for the high percentage of commercial papers and certificates of deposits in its reserve assets, as these lead to perceptions that Tether’s assets are relatively risky. Yet, the focus on short-term deposits and debt obligations and the interest generated remain consistent with Tether’s emphasis on liquidity while providing fuel for growth.

Another common criticism is that Tether is a centralised currency, which is at odds with the decentralisation of the blockchain ecosystem. However, as seen in the recent news about the $611 million Poly Network hack, Tether’s reaction was one of the fastest, freezing $33 million worth of USDT associated with the incident

USDT Stability

Based on historical data, the USDT token price generally holds steady at US$1. While there are slight dips and highs, the market quickly corrects itself to return to the US$1 pegged value. 

USDT Price Chart Coingecko Feb 2022
USDT Price Chart from CoinGecko

USDT Volume

The trade volume for USDT is a testament to the stablecoin’s popularity. As of this time of writing, the 24h trade volume of USDT clocks in at almost $36 billion — a significantly higher amount than the second-place currency (ETH at $21.3 billion). Meanwhile, USDT’s market capitalisation is still steadily increasing in spite of the competition, with a current value of $78 billion.

USDT Market Cap Chart from CoinGecko

What is USDC?

Now that we’ve covered USDT, it’s time for a closer look at USDC (USD Coin) in crypto. USDC was established in 2018 by Circle and Coinbase, and it’s pegged at 1:1 with the U.S. Dollar. Unlike USDT, of which Tether is the only issuer, USDC can be issued and redeemed by other member institutions of the CENTRE Network, such as Coinbase. 

Commercial issuers of USDC are required to meet licensing, compliance, accounting, and technical and operational requirements. To ensure that USDC maintains a constant one-to-one backing, issuers also have to back all tokens with fiat reserves and supply monthly proof of reserves

Based on the latest reserve account report from Circle from December 2021, the total number of USDC stablecoins in circulation is $42.416 billion, with a similar amount of USD (and USD denominated assets) held in reserve. Initially, USDC claimed to be backed by USD in a bank account, but they’ve recently changed their statement to include assets with equivalent fair value. According to their website, the number of USDC in circulation has now crossed over the 50 billion mark — a further testament to the growing popularity of the USDC stablecoin.

As seen in their reserve account breakdown from October 2021, Circle has moved to holding 100% of cash & cash equivalents, which include US dollar deposits at banks and short-term, highly liquid investments that are convertible to established amounts of cash with a maturity of less than or equal to 90 days of purchase, as consistent with US generally accepted accounting principles (GAAP). Proponents of USDC view the stablecoin’s concentration on cash and cash equivalents as indicative of Circle’s capacity to support large-scale USDC redemptions in the event of a crisis.

USDC Stability

Like USDT, the USDC coin price remains stable at around US$1. While there have been dips and highs, these are quickly corrected, returning the value of USDC back to US$1.

USDC Price Chart from CoinGecko Feb 2022
USDC Price Chart from CoinGecko

USDC Volume

USDC ranks eighth according to market capitalisation, and it’s on the rise, albeit with a lower value of $50.9 billion. However, the 24h trade volume for USDC remains significantly lower than USDT at only $2.7 billion versus the latter’s almost $36 billion.

USDC Price Chart from CoinGecko‍ Feb 2022
USDC Market Cap Chart from CoinGecko

Regulations Around Stablecoins in the U.S.

The stablecoin market has grown by 500% over the past 12 months. One of the greatest concerns surrounding stablecoins is the panic that would ensue, in the event of a rush of customers looking to turn their stablecoins into regular dollars, only to find that there is insufficient liquidity, and its subsequent risk to the financial system.

In November 2021, the Biden Administration’s Working Group on Financial Markets (PWG), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) released the PWG Report calling for legislation to limit the issuance of stablecoins to insured depository institutions to allow serious regulation of stablecoins to address the systemic risk they may pose to the economy and financial system.

This is indicative of congress taking action to bring stablecoins into the traditional financial system, by enforcing audits and other regulatory measures to ensure transparency and protection of users. We're seeing signs of this as well, as stablecoin issuers are starting to provide regularly audited reports of reserves to ensure the USD reserves held are equal to the supply of stablecoins at a constant rate of 1:1.

Get Started Investing in Stablecoins

Diversifying your investments to include stablecoins is a great way for investors with moderate risk appetites to profit from crypto market growth, without the volatility risks associated with typical cryptocurrencies. Stablecoins like USDT and USDC constantly maintain their value at US$1, as opposed to the more drastic gains and losses of cryptocurrencies like bitcoin and Ether.

Also, there’s a high demand for stablecoins, which are commonly used to service cryptocurrency trading and serve as a store of value. Due to this demand, depositing your stablecoins in a savings account at a company like Cabital lets you earn interest at a rate of almost ten times that of a bank with minimal risk. 

It's easy to get started with buying USDT on Cabital at competitive rates if you're based in Europe. Cabital offers the option to buy crypto with bank transfer via SEPA, FPS, or Plaid.

As Cabital has no preconditions, you can start with investing a small sum of USDT into Cabital’s 30-Day Fixed Savings plan with a leading APY rate and watch your money grow. Withdrawing your earnings is also a breeze with Cabital, as you'll be able to use the above bank transfer methods to withdraw your profits as fiat money.


All information is accurate at the time of writing.

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