Circle’s issued stablecoin, USD Coin (USDC) nearly brought crypto to a standstill last weekend when it briefly depegged.

Referring to the weekend as long would be an understatement, considering how the market dumped the last time a stablecoin crashed.

The implosion of Terra USD (UST) in May 2022 is still fresh in the minds of crypto enthusiasts and led to intense panic across the market when Circle announced a $3.3 billion in cash reserve exposure to the fallen United States banking giant, Silicon Valley Bank (SVB).

Despite USDC’s woes – which saw the stablecoin drop to $0.87 – not everyone was on the losing end, with some stablecoins experiencing a drastic spike in their market capitalizations.

While Circle swiftly assured investors that the exposure was minimal and only 10% of the $42.1 billion cash reserves were in SVB’s custody, it was the assurance from governments and key regulatory agencies that cooled the selling pressure.

Collaboration between US and British financial regulators on Monday quickly restored investor confidence in Circle and consequently its issued stablecoin coin, USDC. Although the recovery was quick, USDC’s competitors rapidly capitalized on this instability.

Tether (USDT)

USDT is the world’s largest stablecoin – boasting $74 billion in market capitalization – but despite its dominance in the stablecoin sector Tether is not new to controversy.

Questions have always arisen as to whether USDT is fully backed with frequent audits seemingly never fully settling the matter.

In 2021, Alex Mashinsky, the former CEO of the now-defunct cryptocurrency lending company Celsius, told the Financial Times that Tether had been minting new USDT tokens backed by Bitcoin and Ethereum collaterals for a select group of customers – a violation of Tether’s policies.

Within the same year, the Commodity Futures Trading Commission (CFTC) slapped Tether with a whopping $41 million fine.

The CFTC accused Tether of not disclosing the true cash reserves in addition to not adequately backing USDT in the period between June 1, 2016, and February 25, 2019.

Following the fine, Tether appears to have committed to improving transparency to the extent of bringing in the services of BDO Italia, an accounting company to publish frequent financial audits regarding USDT’s reserves.

Last week, Tether’s CEO, Paulo Ardoino confirmed no exposure to both Silicon Valley Bank and Signature Bank via a Twitter post.

During the brief USDC depeg, USDT gained the least compared to other stablecoins, with its market cap growing by approximately $3.1 billion from Friday’s $71.9 billion to Monday’s $75 billion – representing an overall gain of 1.6% within the period.

USDT monthly price chart

How is USDT Backed?

Details of USDT’s backing can be found in the latest published auditor’s report, dated December 2022. The report, “Cash & Cash Equivalent & Other Short-Term Deposits & Commercial Paper,” makes up 82% of the total reserves.

It is worth mentioning that short-term deposits and commercial papers are mainly comprised of US Treasury Bills — 58.5% of the total reserves to be precise. Similarly, Cash and Bank deposits account for only 8% of USDT’s total reserves.

The rest of the reserves are held in various monetary assets and agreements, ranging from market funds, non-US Treasury Bills and reverse repurchase agreements among other assets.

Dai (DAI)

The Dai stablecoin is issued and maintained by Maker, one of the oldest decentralized finance (DeFi) crypto projects. DAI’s reserves are mainly in crypto assets with USDC making up the lion’s share of its balance sheet.

Other digital assets used to back DAI are Ethereum-based including Ethereum (ETH) and Wrapped Bitcoin.

Dai stands out for its decentralized framework, owing to the fact that the organization controlling it is not under single entity management but decentralized – some people refer to DAI as a decentralized stablecoin.

How Much Did Dai Gain From USDC’s Brief Depeg?

Dai is the fourth-largest stablecoin and the 16th-largest cryptocurrency. Following USDC’s slide to $0.87, DAI’s market cap stood at $4.9 billion toward the end of Friday.

However, by Monday morning, its market cap had climbed to $6.3 billion, a 28.6% increase in less than 3 days – the uptick in crypto prices since Monday has not had a positive impact on DAI, with its market share sliding to $6 billion at the time of writing.

DAI monthly price chart

According to Decrypt, ‘DAI was likely a popular destination for people looking to jettison USDC. As people burned USDC en mass, DAI’s supply mooned.’

Unfortunately, the stablecoin could not sustain the uptrend, as DAI itself depegged during the weekend, reaching a low of $0.88 at one point on Saturday, implying a positive correction with USDC.

How is DAI Backed?

DAI has a slightly different backing mechanism from USDT and USDC – for every $1 of DAI, the holder must deposit roughly $1.51 of crypto assets.

DAI’s backing mechanism is managed by a dynamic smart contracts system, whereby in the event of a sharp drop in ETH price, holders are required to top up their collateral, otherwise, they risk being liquidated.


TrueUSD stands out as “the first regulated stablecoin fully backed by the US Dollar,” although it is based on the Ethereum blockchain.

This stablecoin has been in existence since 2018 and boasts a backing ratio of 1:1 solely in fiat, as determined by Chainlink’s proof-of-reserves monitoring tool.

TrustToken platform mitigates counterparty risk by storing its fiat reserves in trust companies’ bank accounts, which are subject to monthly audits as per an agreement.

By relying on a network of third-party accounts, the platform safeguards token holders while boosting consumer trust since TrustToken has no direct access to the funds.

TUSD was the biggest beneficiary of the US Securities and Exchange Commission’s (SEC) decision to take legal action against Paxos, the company that issues BUSD, Binance’s dollar-pegged stablecoin in February.

The largest exchange by daily traded volume moved swiftly, minting up to $180 million in TUSD to be used as an alternative to BUSD. This move marked the beginning of a mouth-watering 114.5% spike in TUSD’s market cap in just 30 days.

Unlike Tether (USDT), however, TrueUSD does have exposure to the crypto-friendly Signature Bank. Decisions were made to pause minting and redemptions for a “small number” of the bank’s users.

However, the rest of its users remained “unaffected” as communicated via a tweet on Monday.

How Much Did TUSD Gain?

During most of Friday, the market capitalization of TUSD remained at approximately $1.3 billion.

However, in the past two days, the cryptocurrency has surged, and now its market cap stands at over $2 billion, with an increase of 53.8%.

TUSD monthly price chart

How Is TUSD Backed?

According to real-time proof of reserves, TUSD’s circulating supply worth $2,024,213,471 is currently supported by $2,032,505,442 worth of fiat bank reserves.

There is a complete match between the circulating supply and the fiat reserves for TUSD.

Liquid USD (LUSD)

Liquid USD is very similar to DAI, which means it operates under numerous mechanics such as overcollateralized loans utilizing native crypto assets, however, it has an added selling point — the zero-interest loan feature.

Interest fees have been replaced by a small one-time fee, paid upfront, as opposed to charging a variable interest rate on the loans.

LUSD is the native dollar-pegged currency of Liquity, a decentralized lending platform. To obtain a loan, borrowers lock their Ethereum as collateral and receive LUSD as payment.

Liquity CEO Michael Svoboda, capitalized on Circle’s USDC’s weekend predicament and the crypto banking crisis to promote the company’s stablecoin, LUSC. The token’s fans jumped in and retweeted tweets by the CEO in droves, creating a formidable buzz around the stablecoin.

How Much Did LUSD Gain?

Throughout Friday, the LUSD market cap hovered around $230 million. However, it blew up amid USDC’s saga and the market cap had surged by 10.4% to $254 million by Monday.

LUSD has since sustained its market cap in addition to holding at $257 million on Wednesday.

LUSD monthly price chart

How Is LUSD Backed?

Liquid users access loans on LUSD but are required to lock their ETH as collateral.

For that reason, for every $1.10 of collateralized ETH, users can mint $1 of LUSD in normal operations, making the stablecoin much more preferable to borrowers in comparison to what DAI offers.

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