USDC vs USDT - Which is the better Stablecoin?
While nobody in crypto is particularly a fan of Fiat currencies, there’s a real need for a stablecoin to hide in when you expect a market downturn or simply while trading in and out of various cryptocurrencies — and while there’s DAI it doesn’t have the trading volume and liquidity that USDT and USDC offers.
While there’s many other Stablecoins now in 2022 you can use, including USDT, USDC, Actual Fiat, T-USD, GUSD, BUSD, Paxos USD, and many others, truthfully the two giants, USDC and USDT, are still dominant and the best choice due to the liquidity the trading pairs have and the ease of transferring them between exchanges, as basically every exchange accepts both USDC and USDT, while few support the other Stablecoins on the market today.
In this article we’ll cover the differences between the two coins, and which coin we personally use and why we use it instead of the other.
To Summarize – We use USDC (backed by Coinbase) as it’s actually been and continues to be audited, and thus is far safer than USDT as we know Coinbase is solvent and has the funds while we truthfully have no idea if Tether Ltd (issuer of USDT) has sufficient dollars to back up the USDT they’ve issued to-date..
Below you’ll find a table of contents that’ll give a good impression on what we’re going to dive deep into and what to expect in the rest of this post. Keep in mind none of the below is financial advice, you must make your own independent risk-assessment.
If you don’t feel safe using either using traditional fiat may be the better choice for you, with Coinbase being publicly traded we’d say USDC is just as safe as it – but ultimately it’s your choice.
Table of Contents
Comparing USDC verses USDT:
There’s many different categories to face USDC and USDT head to head against one another — but here’s how we’re going to start off: first we’ll compare the ease of access of both USDC and USDT, which one you can get to and from fiat for the cheapest, and then we’ll go into which offers better liqudity, which stays true to it’s stated goal of being around $1/coin, and finally which offers the best interest rates when lending them out.
Which Is more widely available?
USDT is slightly more widely available than USDC, however most large exchanges, and all DeFi exchanges (obviously) have trading pairs with USDC now as well. So long as you’re trading on a bigger exchange such as Binance, Kraken, Coinbase, Gemini, or Kucoin, you shouldn’t have any issues with availability — and as mentioned before all DeFi exchanges would obviously have USDC-pairings, as they generally world through liquidity pools.
What’s the Cheapest place to buy USDC or USDT?
Does USDC or USDT have better liquidity, and where?
Does USDC or USDT fluctuate in value more?
When Lending Stablecoins out which gives more yield?
This is tricky to answer as it changes so much — but generally Celsius offers the best yields on Stablecoin deposits, with Nexo and BlockFi being close behind in rates for Stablecoins such as USDT and USDC, offering around 7% to 11% per year currently depending on if you earn in-kind or in the platforms native token.
Ultimately it’s never best to chase yields — generally it’s better to diversify and keep some with each of the platforms to minimize your risks, as they could change their rates any day, so BlockFi may have better rates than Celsius next week even though Celsius has the best rates on Stablecoin deposits right now.
Is USDT or USDC Safer?
In terms of technology they’re essentially exactly the same — they’re centralized tokens developed on the decentralized Ethereum blockchain. Nobody is going to reach into your Ethereum Wallet, or into the Exchange wallet and take USDT easier than USDC or vise versa.
However when it comes to the fundamentals of the coins, we’d safe USDC is safer — although not as much as the USDT-haters may lead you to believe.
We say this because USDC is “manufactured” by one of the largest cryptocurrency exchanges in the world (a publicly traded and regulated one) that has excellent security and profitability — and more importantly — is audited frequently to ensure their solvency. This includes audits on usdc, ensuring that they have sufficient deposits to back every usdc coin that’s currently in circulation.
Meanwhile USDT has has had suspicious incidents in the past that makes people believe they actively have stopped audits from taking place — and as a result that they must not be solvent and have adequate USD reserves for all the tokens they’ve issued. New information revealed by in the only tether audit we’re aware of showed that they only have around 70% -> 75% of the USD to cover the USDT coins they’ve issued.
Overall it’s clear that, knowing the history and transparency of both of these companies, that USDC is clearly safer and a better choice now that it’s traded on most cryptocurrency exchanges and has ample liquidity.
Is USDT Unsafe Since It's not 100% Backed by USD?
While many people would say this — we won’t. Most banks don’t even have 10% yet alone 70% of their deposits redeemable for cash. It’s unlikely Tether actually goes bust or declines significantly — at least in the short-term.
Overall if you MUST trade into USDT to trade the altcoins you want from a stable-coin, then go for it — we’d just avoid holding USDT for long periods of time such as during a market correction. Instead opt for putting it in the far safer, trustworthy, and audited stablecoin called USDC.
Is USDC Unsafe Because it's not FDIC-insured?
I don’t know how to sugar coat this — but FDIC doesn’t have enough deposits to cover banks in case of a bank run — yet alone a collapse, so really FDIC-insurance is nothing more than feel-good worthless bragging rights regular US-banks use to provide a false sense of security.
No, USDC is not FDIC-insured — but this would only be an issue if Coinbase goes out of business, which should never happen due to them having crypto to hedge their dollars, low operating expenses, and excellent security (cold-storage) for their cryptocurrency deposits — not to mention expensive insurance to cover those in case of theft/hacking.
The only real risk to holding USDC, particularly in the long-term, is that the US Dollar isn’t backed by anything it’s self and could lose it’s value in relation to crypto or anything somewhat “real,” but this is the nature of fiat currencies — ultimately this is why we personally hedge our investment portfolio with cryptocurrency.
Where Should USDC/USDT be Kept?
Personally while we don’t hold much USDC or USDT, or any stablecoin for that matter, including decentralized ones like DAI, but we’d say the best place to keep such assets depend on your purpose in keeping them. If you’re day-trading using them then obviously they’ll need to be on an exchange or def-connected wallet to allow you to make trades at a moments notice.
However if your reason for holding stablecoins isn’t daytrading, then there are better alternatives — namely lending them out on interest-bearing platforms such as Celsius or BlockFi, which give you a yield of 8% -> 14% annually on stable-coin deposits, not to mention offer pretty good signup bonuses, $50 bonus in BTC when signing up to Celsius and between $15 and $250 depending on your initial deposit (generally around $20-$40, when signing up for BlockFi.
Besides the sign-up bonuses though, ultimately we prefer Celsius due to them generally offering a higher yield than BlockFi on stablecoin deposits — often beating out BlockFi by 3% -> 4% annually — this is why we currently only use Celsius for our stablecoin holdings, while we use both when it comes to Crypto-deposits, as their rates when it comes to Bitcoin/Ethereum and other crypto-assets are relatively similar otherwise.