Tether's USDT has seen a notable surge in market capitalization compared to Circle's USDC following a series of major cryptocurrency hacks this month. The exploit of Solana-based Drift Protocol for $285 million has accelerated this trend, pushing USDT's market cap to an all-time high.
Since the Drift Protocol hack, USDT's market cap has increased by 2.1% to nearly $188 billion. In contrast, USDC's total value saw a slower rise of 1.4%, reaching $78.25 billion. Analysts at Compass Point suggest that significant DeFi outflows could pressure USDC's circulation, potentially impacting revenue for both Circle and Coinbase.
Analysts noted that users may off-ramp USDC or hold it on exchanges, which would affect interest revenue for Circle and Coinbase. This sentiment is echoed by observations of rapid stablecoin withdrawals from protocols like Aave after other incidents.
Nansen analyst Jake Kennis stated that Tether's USDT likely offers superior liquidity during DeFi crises. He posited that USDT's deeper liquidity across centralized venues provides a more immediate "flight to safety" option for users seeking rapid exits from volatile on-chain positions. The larger market share and broader exchange integration of USDT create network effects that can amplify during periods of elevated protocol risk.
The Drift exploit has also intensified scrutiny on Circle. Following the hack, Circle faced a class-action lawsuit for its alleged failure to freeze funds moved through its infrastructure. Circle's CEO, Jeremy Allaire, has defended the company's stance on unilaterally freezing funds, citing moral complexities. Meanwhile, Drift has indicated it will cease supporting USDC, reportedly after receiving recovery commitments from Tether.
Compass Point analysts have maintained a "Sell" rating on Circle shares with a price target of $77.