How to make the most of USD Coin (USDC)

ProductSep 28, 2022
How to make the most of USD Coin (USDC)

Bitcoin and Ether make headlines for hefty returns, but their volatility also magnifies losses. Like its counterpart Tether, USD Coin offers stable value based on the world’s biggest reserve currency. Discover what USDC is and how to make the most of your holdings in our guide.

What is USDC (USD Coin)

Stablecoins are cryptocurrencies protected from market turbulence via pegging to real-world assets — fiat or commodities. Here are the key things to know about USD Coin:

  • USDC was launched in 2018 as a joint effort by Coinbase and Circle.
  • This stablecoin is based on the ERC-20 token standard used on the Ethereum blockchain.
  • Center, a governing consortium, oversees the technical and financial standards for the stablecoin. It maintains transparency around the 1:1 backing.
  • For every token minted, 1 USD is held in reserve, which includes cash and US Treasuries.
  • The total supply is uncapped — approved and regulated financial institutions issue USDC on demand.
  • As a “programmable dollar”, USDC contributes to the adoption of crypto and decentralized finance worldwide.

How does USDC work technically?

USDC’s compatibility goes far beyond Ethereum wallets and ERC-20 exchanges. The token also works with other blockchain networks, including Algorand, Solana, Stellar, TRON, and Flow. Virtually anyone with an internet connection can use USDC.

For each token issued, one US dollar is deposited to the reserve. When the holder redeems their digital assets, they are irrevocably destroyed, or burned, following successful verification and validation of the request. This logic underlies the 1:1 USDC value ratio. All burned tokens disappear from circulation, and the underlying reserves return to the customer’s external bank.

Pegging, the bedrock of the stablecoin concept, requires trust and transparency from all overseeing entities. Center goes above and beyond in this regard, providing regular updates from a top-five accounting firm.

Is USDC safe?

According to Circle, holders can redeem USDC for US dollars at any time as the stablecoin is fully reserved. Hence, the total value of tokens in circulation matches the value of cash and short-dated U.S. treasuries backing it.

As of September 15, for the total supply worth $50.4 billion, treasuries account for $40.1 billion, with the remainder — $10.4 billion — held in cash, so the total value of reserves is $0.1 billion higher. Overall, compared to Tether, Inc., Circle and the Center Consortium have done more to stay transparent in terms of backing.

  • Circle is a licensed and regulated money transmitter under U.S. state law, on par with giants like Apple Pay and PayPal.
  • The USDC reserves are held in the custody of BlackRock, the biggest asset management firm in the world, and The Bank of New York Mellon Corporation (BNY Mellon), a US investment banking services holding company.
  • Circle’s financial statements, audited annually, are also subject to review by the SEC.
  • All attestation reports are available on the official website.
  • Grant Thornton LLP, one of the largest audit, tax, and advisory firms in the US, provides independent monthly assurance as to the size of the reserve.
USDC year-to-date supply growth as of September 22, 2022. Source: TradingView
USDC year-to-date supply growth as of September 22, 2022. Source: TradingView

USDC use cases

One of the things making USDC stand out is its suitability for medium to large amounts. By attracting both retail and institutional investors, it plays a significant role in making crypto mainstream. With USDC, you can:

Access the crypto market

In conventional banks, cashing out can take effort. Stablecoins make buying, selling, and transferring funds easy. Users can swap their assets for USDC on nearly any major crypto exchange, CeFi or DeFi, and make transactions within the crypto ecosystem.

Make international remittances

Conventional overseas transfers can be extremely costly and effortful. Some institutions spend days processing fiat payments and impose substantial fees. Transferring USDC to anyone with a crypto wallet comes at a fraction of the cost.

Receive payments in crypto

In recent years, employees and professional athletes have shown increasing interest in crypto-denominated salaries. Despite the dominance of Bitcoin and Ethereum, their volatility complicates these payments. Stablecoins like USDC protect employees from adverse market dynamics. Another benefit is the opportunity to purchase any other cryptocurrencies with ease.

Earn interest on USDC

USDC holders can deposit their tokens to crypto platforms. CoinLoan’s Interest Account combines highly competitive USDC APY with the reliability of a regulated financial institution. The rates are significantly higher than the return on conventional savings accounts.

Support crowdfunding and charity

USDC is increasingly common in relief programs for two reasons — the ease of transfer and stable value, which protects the funds raised. Governments can support businesses and individuals and encourage international donations. Startups and nonprofits can also solicit USDC from investors worldwide. Finally, residents of countries with runaway inflation gain easy exposure to the US Dollar.

Applications of USDC. Adapted from Circle
Applications of USDC. Adapted from Circle

Key advantages of USDC

As a stablecoin, USDC can serve as a hedge against erratic market swings. In addition, it combines the virtues of a fiat currency with quick, convenient, and zero-fee transfers around the world.

Protection against volatility and inflation

Like Tether, USD Coin enables investors to protect their holdings against wild volatility despite staying in the crypto economy. Those selling volatile crypto for USDC at the top to repurchase it later can swap the tokens at any moment.

As stablecoins mitigate portfolio volatility, USDC is a popular pick for diversification. Investors can buy it amid market turmoil to stabilize the value of their holdings. Foreign investors also benefit from exposure to the US dollar as a hedge against local inflation.

Trusted store of value

As the US dollar fully backs USDC with a consistent 1:1 peg, it is a trusted digital asset. Circle also maintains transparency by publishing audited reserve reports. In comparison, Tether, the strongest rival, was hesitant to release such data until faced with legal action.

Pricing in fiat money

The peg makes prices denominated in USDC intuitive, whatever the asset. This logic holds on any crypto exchange. Moreover, USDC’s price stability enables it to represent fund investments, equity ownership, liabilities, or debt.

Simple payments

USDC does not require a bank account, which makes it suitable for the unbanked. Furthermore, holders make transfers worldwide without worrying about volatility.

Unlike USDT, USDC is divisible. While the smallest Tether unit is 1 USDT, it allows transactions as small as 0.001 USDC (equal to one-tenth of a US cent).

How to pay with USDC

The number of businesses accepting USDC, big and small, is constantly growing. There are three main ways to pay with the stablecoin:

  • pay merchants directly from your USDC wallet
  • buy gift cards
  • send P2P transactions

More and more brands allow customers to purchase gift cards for USDC. The Bitpay directory includes such companies as Adidas, Airbnb, Burger King, Domino’s, Home Depot, Hotels.com, and Nintendo.

Multi-chain compatibility

As USDC is an ERC-20 token, it is compatible with multiple blockchains, including Ethereum and Solana. Thus, holders can buy a wide range of other cryptocurrencies and NFTs. As a result, USDC facilitates the integration of payment systems and cross-chain apps.

USDC staking

Holders can earn rewards through USDC staking and profit from trading pairs. It is important to note that USDC interest rates in DeFi are fluid and do not constitute guaranteed returns. CoinLoan’s Interest Account offers a higher-than-average USDC APY of up to 12.3% with all the benefits of a regulated financial institution (learn more below).

Disadvantages of USDC

Despite the variety of use cases and benefits, USDC is not for those seeking profit from high-risk investments. It is not a speculative instrument. Hodlers cannot earn by simply keeping their tokens in a wallet.

Limited price volatility

USDC was not designed to gain or lose value on its own (it only depends on the USD dynamics). The absence of price appreciation is the flip side of pegging. It is, however, offset by the variety of use cases, including interest accounts, yield farming, and USDC staking.

Runner-up

In terms of market cap, USDC is inferior to USDT (Tether), which was released four years earlier. However, the gap between them is gradually shrinking ($68 billion against $50.3 billion as of this writing). USDT is vying for the top position.

USDC value

As long as the value of the reserves matches the circulating supply, USDC will stay at around $1. The reserve assets, which include US dollars and Treasury securities, are held in segregated accounts with regulated financial institutions. Grant Thornton oversees the accounts and issues monthly attestation reports.

According to Coingecko, the price hit an all-time high of $1.19 in May 2019, with an all-time low of $0.891848 two years later. Supply and demand are the primary cause of such momentary shifts. Interest in USDC decreases during bullish cycles and rises again when bears take over. Generally, the token shows prolonged periods of stable value at $1.

USDC price between September 22, 2021, and September 22, 2022. Source: Coingecko
USDC price between September 22, 2021, and September 22, 2022. Source: Coingecko

How to buy USDC

Individuals can buy and sell USDC via crypto exchanges and providers, including the CoinLoan Exchange.

USDC fees

As USDC is an ERC-20 token, it is primarily sent via the native network. Its gas fees fluctuate, rising and dropping along with congestion. Use the official Ethereum gas tracker to check the current rates. The recent switch to Proof of stake should bring the costs down.

USD Coin on CoinLoan

The second most popular stablecoin works with all CoinLoan products. You can buy USDC through our trusted exchange or have a quick USDC loan delivered in seconds. Earn up to 12.3% APY with our Interest Account or borrow other digital assets against the stablecoin.

CoinLoan is an all-in-one environment for growing your crypto. Get USDC and dozens of other cryptocurrencies 24/7 via our app or web platform. Create an account and make the most of USDC in one or more ways:

Use USDC as collateral for crypto loans

Borrowing crypto is easy — our instant loans do not require proof of income or credit score checks. Registered users can get USDC in seconds or use their stablecoins as collateral to borrow another crypto. Repay on your own terms — choose a convenient period and LTV.

Use USDС to receive interest

Earn standard compound USDC interest on your USDC holdings in Interest Account or boost the yield by staking CLT.  We offer:

  • 10.3 % APY on USDС
  • Up to 12.3% on USDС with CLT Staking

Buy or swap USDС on CoinLoan Exchange

Buy and sell USDC on CoinLoan through its trusted Crypto Exchange. Explore dozens of exchange pairs, including USDC/ETH, USDC/BTC, and USDC/XRP.

Final word

Volatility, while enabling handsome returns, puts crypto holdings at risk. US Coin, the closest competitor to Tether, offsets large swings in value, combining the merits of the leading reserve currency with crypto use cases. Such digital assets open a realm of opportunities to investors in and outside the United States. You can send stablecoins anywhere at any time, use them to hedge against inflation, pay for goods and services, earn interest on USDC, and more!

Disclaimer:

The information provided by CoinLoan (“we,” “us,” or “our”) in this text is for general informational purposes only. All investment and financial opinions expressed by CoinLoan in this text are from the personal research and open information sources and are intended as educational material. All outlined information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information in this text.

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