Since then, Tether's advantage over Circle has been growing.SolanaEarlier this month, a vulnerability on Drift Protocol was exploited, resulting in losses of up to $285 million.Decentralized FinanceOn Tuesday, following another major hack, users appeared to drive USDT's market cap to an all-time high.
Due to the attackerslinkNorth Koreapull downUSDT is reported to be one of the largest hacks in the DeFi space this year, with its market cap rising 2.1% to nearly $188 billion.CoinGeckoMeanwhile, the total value of USDC has grown at a slower pace, increasing only 1.4% to $78.25 billion.
On Tuesday, analysts at investment bank Compass Point noted in a report that DeFi outflows could put pressure on USDC’s on-chain circulation, a dynamic that would reduce the earnings Coinbase and Circle derive from the stablecoin’s backing assets—U.S. Treasuries.
They wrote: "DeFi outflows could lead users to sell USDC or hold USDC on exchanges with yield-sharing mechanisms. Either outcome would put pressure on the gross profits of CRCL and COIN by reducing interest income or profit margins."
Analysts' assessment is partially based on the fact that investors withdrew $1.5 billion in stablecoins from lending protocols.Avi after the attackslidingassociated with the fundsreprotocol Kelp DAO and used them to borrow from the Aave platform.
Although users have rushed to buy both stablecoins since the Drift protocol was compromised, Tether’s products may benefit from superior crisis liquidity as market panic intensifies, said Jake Kennis, senior research analyst at blockchain analytics firm Nansen.Decrypt.
He said: "This gap may reflect deeper liquidity for USDT on centralized exchanges, which provided a more direct 'safe-haven' pathway during DeFi stress events, especially for users seeking to quickly exit their on-chain positions."
Although both stablecoins are well-collateralized, USDT’s broader exchange integration and larger existing market share create network effects that often intensify during periods of heightened protocol risk,” he added.
The exploit on Drift has also intensified scrutiny of Circle’s security procedures. After attackers exploited Circle’s infrastructure to transfer millions of dollars in cryptocurrency from one network to another, the company…beLast week, the company faced a class-action lawsuit over allegations of failing to freeze funds.
Circle defends its actions, with CEO Jeremy Allaire arguing that unilaterally freezing user funds raises “significant moral dilemmas.” Meanwhile, Drift also...signalsAfter receiving Tether’s commitment to restore funds, the company will cease support for the stablecoin.
Compass Point analysts set Circle's stock target price at $77 and maintained a "Sell" rating. According to reports, the stablecoin issuer's stock traded below $98 on Tuesday, down 8% from the previous day.Yahoo Finance.
DecryptedCircle and Tether have been contacted for comment.