USDC’s circulating supply has fallen to around $73 billion from nearly $80 billion in March, reducing its share of the roughly $312 billion stablecoin market as competition from newly regulated issuers intensifies.
Circle shares fell more than 17% on the day of the USD Open announcement, although CoinShares said the decline was likely amplified by technical selling related to the Russell index reconstitution.
However, the report suggests that the market may be overreacting. Open USD has yet to launch, important details remain unresolved, and Circle maintains a significant advantage thanks to USDC’s significant liquidity and years of integrations between exchanges, DeFi, and payments.
Open USD is unlikely to pose a major threat to Tether, whose dominance in emerging markets and offshore dollar liquidity gives USDT, by far the largest stablecoin, a different competitive moat, the report adds.
For now, investors should monitor whether Circle changes its distribution strategy and whether Open USD can convert its high-profile support into adoption, CoinShares said. Until then, the project remains a credible, but unproven, challenge to USDC.
CoinShares is not alone in noticing the challenge posed by Open USD. Japanese investment bank Mizuho downgraded Circle from neutral to underperform and cut its price target from $85 to $50 in a note to clients Tuesday, arguing that the new rival’s business model threatens the stablecoin issuer’s long-term economics.
