USDC Market Cap Surges 80 Percent Above 2023 Lows

The circulating supply of Circle’s United States dollar-backed stablecoin, USD Coin (USDC), has seen a significant increase of 80% from cyclical lows. As per the data from Blockworks Research, this rise is directly correlated with the increasing onchain activity in the market.

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Approaching $44 Billion Circulating Supply

As of January 2nd, USDC’s circulating supply is nearing $44 billion, a substantial increase from the 2023 low of less than $24 billion. This surge can be attributed to various factors, including the growing adoption of decentralized finance (DeFi) and the expansion of alternative blockchain networks.

Holding Distribution Across Networks

According to Blockworks data analytics manager Dan Smith’s January 2nd post on the X platform, holdings are becoming more evenly distributed across different blockchain networks as users migrate beyond Ethereum. This shift reflects the increasing onchain activity and the rise of alternative layer-1 networks such as Solana and Hyperliquid.

Trend Continuation

Analysts expect this trend to continue, with USDC’s market capitalization potentially doubling in the coming year. As mentioned by Smith, the distribution of USDC holdings is changing rapidly, with a significant portion now held on Solana (10%), followed by Base and Arbitrum – both Ethereum layer 2s – as well as Hyperliquid, a layer 1 for low-latency trading.

Diversification Across Networks

In 2023, USDC was heavily concentrated on Ethereum, which held 85% of the stablecoin’s circulating supply. However, this has started to change, with Solana gaining significant traction in recent months. As reported by Grayscale, retail traders are increasingly entering the crypto market through Solana, driven by speculation around Solana-based memecoins and AI agent tokens.

Solana’s Rise

The total value locked on Solana surged from approximately $1.5 billion in January to nearly $8.5 billion by December 2024, according to data from DefiLlama. This growth is a testament to the increasing adoption of Solana as a viable alternative to Ethereum.

Stablecoin Market Capitalizations

The combined market capitalizations of the top three stablecoins – Tether’s USDt (USDT), USDC, and Dai (DAI) – grew by more than $25 billion after Donald Trump’s presidential election win in the United States. This increase was driven by a combination of factors, including regulatory changes and increasing adoption of DeFi applications.

Future Growth Projections

Cryptocurrency researcher Steno Research expects USDC’s circulating supply to more than double during 2025, reaching highs of around $100 billion. However, this growth hinges on a critical assumption: that Tether remains unregulated within the European Union. If this scenario unfolds, we can expect European residents to increasingly adopt USDC as an alternative to Tether’s USDT.

Accelerating Stablecoin Adoption

The accelerating adoption of stablecoins is particularly bullish for DeFi, as ‘stablecoins are the on-ramp to decentralized finance,’ according to Citi. In December 2024, Grayscale added several DeFi applications, including two on Solana, to its list of top tokens to watch in the first quarter of 2025.

Impact on Decentralized Finance

The increasing adoption of stablecoins is expected to drive growth in the DeFi space, with Citi stating that ‘stablecoins are the on-ramp to decentralized finance.’ As such, the continued rise of USDC and other stablecoins is likely to have a positive impact on the development and adoption of DeFi applications.

Conclusion

The circulating supply of USDC has risen 80% from cyclical lows as onchain activity picks up. With analysts expecting this trend to continue, we can expect USDC’s market capitalization to potentially double in the coming year. The increasing adoption of stablecoins is expected to drive growth in DeFi, making it an exciting space to watch in the coming months.