$USDC USDC from Circle Will Likely Remain the Preferred Stablecoin of DeFi: Compass Point

Circle's USDC stablecoin has a dominant presence in the growing number of decentralized exchanges, lending protocols, and other DeFi environments in the crypto ecosystem, analysts say.

Stablecoin legislation could pave the way for a large number of new competitors for Circle and its USDC stablecoin in the United States, but in the realm of decentralized finance, or DeFi, it is unlikely that a serious rival will emerge in the short term, according to analysts from investment bank Compass Point.

While Tether's USDT dominates in emerging markets, Circle's USDC stablecoin has a dominant presence in the growing number of decentralized exchanges, lending protocols, and other DeFi environments in the crypto industry, analysts Ed Engel and Joe Flynn wrote in a note on Wednesday.

Circle debuted on the New York Stock Exchange on Thursday, aiming for a valuation of $6.9 billion based on an initial public offering at $31 per share. A distinctive advantage that supports that valuation, the Compass analysts wrote, is the widespread use of USDC in DeFi.

"USDC is the most traded asset on decentralized exchanges," they wrote. "In fact, in most DeFi applications, USDC is the most commonly used stablecoin.

Stablecoins are digital assets linked to the price of a fiat currency, such as the US dollar. Within the context of cryptocurrencies, traders often use them as a way to secure profits or deposit collateral for loans; however, their use has grown in areas such as payments and remittances.

In the past year, trading volumes on decentralized exchanges have increased relative to centralized exchanges, representing 26% of daily trading volumes earlier this month, or $14 billion, up from 8% a year ago.