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When compared to its $66 billion rival giant Tether (USDT), Circle’s native stablecoin USD Coin’s growth in the previous two months has been nothing short of amazing.

Notably, since May, USDC’s market value has increased by 8.27%, peaking on July 2 at $55.9 billion. Contrarily, USDT’s market valuation, now hovering around $66.14 billion, has decreased by more than 19 percent.

Based on the narrowing difference between their market capitalization, USDC has never come close to challenging USDT’s dominance in the stablecoin market.

More specifically, in August 2020, the USDT to USDC market cap ratio exceeded “9”. However, as shown in the table below, it fell to 1.20 in July, the lowest on record.

Since Terra’s $40 billion “algorithmic stablecoin”  failed in May, cryptocurrency investors have become skeptical out of concern that it would also happen to USDT.

That is mainly because there are rumors that Tether’s USDT tokens aren’t fully backed by cash and other conventional assets as it claims.

What’s In Store For USDT

Because of this, short sellers have increased their bets that USDT would soon drop below its $1-peg. According to the Wall Street Journal, these bearish positions might be worth “hundreds of millions” of dollars.

These bets assume that, in the event of a “bank run,” Tether would not be able to convert all of its USDT into dollars. As a result, the peg would be broken as people started selling their stablecoin at a loss.

In times of high market volatility, USDT has a history of deviating from or exceeding its $1 peg; however, this was more noticeable in its earlier years.

For instance, in October 2018, amid rumours that one of its sister companies, crypto exchange Bitfinex—is insolvent, the token’s value fell as low as $0.85 (on Kraken).

Similar circumstances resulted in USDT’s value suddenly falling to as low as $0.97 after the Terra collapse in May. Nevertheless, the stablecoin consistently regained its tie to the dollar.

In contrast, USDC Coin has only twice fallen below the typical $0.99-1 range since its 2018 introduction. During the “Covid crash” in March 2020, it fell to $0.97 before rising to $1 and then falling once more to $0.98 in the same month.

Tether’s chief technical officer, Paolo Ardoino, promised in June that one of the top 12 accounting firms would conduct a complete audit of the company’s reserves. Currently, MHA, an accounting firm, offers quarterly attestations of Tether reserves.