Since the Tornado Cash affair, Circle’s USDC stablecoin’s market valuation has fallen precipitously.
The market capitalization of USD Coin (USDC), which fell from $53.3 billion to just under $43.9 billion during the previous month, has decreased by almost 20%. Almost $5 billion was withheld on a single day (September 26), resulting in a loss of nearly 9.2% of its total capitalization.
It would have experienced its sharpest shrinkage ever with this. The market capitalization of the stablecoin reached its pinnacle in July at $55.8 billion.
USDC market capitalization, Source: Tradingview
The Effects of Freezing USDC Cash-Linked Tornado Addresses
Although it started to lose popularity in July, the move to freeze over 75,000 USDC of cash related to 44 Tornado Cash addresses was a turning point that led to anger and a wave of withdrawals.
Circle just frozen 75,000 USDC belonging to unsuspecting Tornado users, as well as 149 USDC donated to the project. pic.twitter.com/GBS41FtZvB
— banteg (@bantg) August 8, 2022
Even MakerDAO, which had a significant portion of its reserves backed in the Stablecoin, viewed Circle’s actions as a breach of privacy rights. The project began to discuss ending its reliance on the Stablecoin. Thereby, stating that given the extraordinary degree of centralization that USDC has by nature. Then, it could at any time meet the same fate as the wallets connected to Tornado Cash.
Even though it appeared as though MakerDAO was turning against the stablecoin. They announced yesterday that a new plan to deposit USDC on Coinbase’s institutional custody platform had been approved. They will escrow up to $1.6 billion of their reserves on Coinbase Prime in order to earn 1.5% in rewards.
Therefore, even if the Stablecoin’s capitalisation keeps declining, significant projects are still placing bets on its potential for future recovery.
