The collapse of FTX in late 2022 triggered a seismic shift in the stablecoin landscape, with USD Coin (USDC) emerging as a preferred choice for many crypto users. Despite having a significantly smaller market capitalization than Tether (USDT), USDC has consistently recorded higher daily on-chain transfer volumes—sometimes reaching up to five times that of its dominant rival.
According to data from blockchain analytics firm Glassnode, this trend began shortly after the FTX crisis unfolded and has persisted into 2023. Even though USDT maintains a lead in total market value—approximately $23 billion more than USDC as of January 10—on-chain activity tells a different story. The surge in USDC transfers reflects growing user confidence in its transparency, regulatory compliance, and perceived stability.
👉 Discover how market dynamics are reshaping stablecoin preferences in 2025.
The Turning Point: FTX Collapse and Stablecoin Shift
The turning point came on November 6, when Binance CEO Changpeng Zhao announced the exchange would liquidate its entire holdings of FTT, the native token of FTX. This news sent shockwaves through the crypto market and accelerated a loss of trust in centralized platforms with opaque financial practices.
Shortly thereafter, FTX filed for bankruptcy, revealing massive exposure to affiliated entities like Alameda Research. In the aftermath, investors rushed to move funds into assets perceived as safer and more transparent. That’s where USDC gained momentum.
Unlike USDT, which has historically faced scrutiny over reserve composition and audit transparency, USDC is issued by Circle and backed by cash or short-term U.S. Treasury securities. These reserves are verified monthly by Grant Thornton, a globally recognized accounting firm—adding a layer of credibility that resonated strongly during the crisis.
On-Chain Data Reveals User Preference
Between October 8, 2022, and January 10, 2023, Glassnode data shows that USDC consistently outperformed USDT in daily transfer volume, often by a factor of 4 to 5 times. At one point, USDC saw an average of $12.5 billion more in daily on-chain transactions than USDT.
This shift wasn’t just about panic-driven movement—it reflected a broader reassessment of risk among institutional and retail users alike. With billions at stake, many opted for a stablecoin with clearer reporting standards and stronger institutional backing.
Tether, on the other hand, has long been criticized for its lack of regular independent audits and historical opacity. In October 2021, the company was fined $41 million by the U.S. Commodity Futures Trading Commission (CFTC) for misleading claims about its dollar reserves. The CFTC found that between 2016 and 2018, Tether only had sufficient reserves to back its tokens 27.6% of the time, despite asserting full 1:1 coverage.
While Tether has since improved its reserve structure—replacing commercial paper with cash, bank deposits, and U.S. Treasuries—the damage to perception lingered. As of November 10, nearly $46 billion of its reserves were held in safer assets, yet doubts remained among cautious investors.
Why Transparency Matters in Stablecoins
The core promise of any stablecoin is simple: 1:1 parity with the U.S. dollar, maintained through adequate and liquid reserves. But how that promise is upheld matters deeply to users navigating a high-risk digital asset environment.
Supporters of USDC argue that its monthly attestation reports provide greater accountability and predictability compared to Tether’s less frequent disclosures. This regular verification process helps reassure users that their funds are not exposed to hidden risks or volatile instruments.
In contrast, while Tether now publishes detailed reserve breakdowns on its website, these reports come less frequently and have evolved over time in response to regulatory pressure rather than proactive transparency.
During periods of market stress—like the FTX collapse—this distinction becomes critical. When USDT briefly lost its dollar peg amid fears of FTX and Alameda’s exposure, even though Tether denied any direct connection, on-chain analysis suggested coordinated shorting attempts against the stablecoin.
👉 See how real-time data influences stablecoin trust and adoption today.
Historical Context: From Dominance to Competition
Prior to 2022, USDT was unchallenged in both market cap and transaction volume. Between May 2018 and January 2022, Tether grew its supply from $879 million to over $61 billion—an increase of nearly 603%—which the company hailed as evidence of “ongoing trust and confidence” in its product.
At that time, USDC was still gaining traction, primarily used within DeFi protocols and among regulated institutions. But as regulatory scrutiny intensified and major exchanges began emphasizing compliance, USDC’s model proved increasingly attractive.
By mid-2021, USDT still led in transfer volume. However, the events of late 2022 flipped the script. Users began prioritizing security, auditability, and regulatory clarity over sheer network dominance.
Frequently Asked Questions (FAQ)
Q: Why is USDC transferring more than USDT even though it's smaller in size?
A: Higher transfer volume indicates stronger user activity and trust. After the FTX collapse, many investors moved funds into USDC due to its transparent reserves and monthly audits.
Q: Is USDC safer than USDT?
A: Many experts consider USDC safer due to its consistent third-party attestations and backing by U.S. Treasuries. While Tether has improved transparency, past issues continue to influence perception.
Q: Can both stablecoins maintain their dollar peg?
A: Both aim to maintain a 1:1 value with the U.S. dollar. USDC has remained stable throughout recent crises. USDT briefly depegged during the FTX collapse but recovered quickly.
Q: What role does regulation play in stablecoin preference?
A: Regulation increases trust. USDC is issued by a regulated U.S. entity (Circle), while Tether operates under less transparent jurisdictional oversight.
Q: Could USDC overtake USDT in market cap?
A: While possible long-term, USDT still leads by over $20 billion. However, growing institutional adoption of USDC may narrow the gap.
Q: Are there risks associated with either stablecoin?
A: Yes. Both carry counterparty and regulatory risks. Any failure in reserve management or sudden regulatory action could impact stability.
Looking Ahead: Trust Over Size
The post-FTX era has shown that market dominance doesn't always equate to user trust. While Tether remains the largest stablecoin by market cap, USDC has become the preferred vehicle for value transfer—especially among those prioritizing transparency and compliance.
As regulators worldwide push for stricter rules on stablecoins, issuers with clearer governance models are likely to gain further ground. For now, on-chain behavior speaks louder than balance sheets: users are voting with their wallets.
This shift underscores a broader trend in cryptocurrency adoption: maturity. Investors aren’t just chasing yield or speed—they’re demanding accountability, clarity, and resilience. And in this new environment, USDC is proving it can deliver.
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