According to recent data, the amount of USDC (USD Coin) in circulation has decreased by more than 10% since the recent de-peg event. The de-peg, which occurred on May 19, saw the value of USDC drop below its pegged value of $1. As a result, investors withdrew their funds, causing the circulating supply to decrease significantly. This development highlights the inherent risks of stablecoins and the importance of understanding their mechanisms before investing in them.
Stablecoin Market Goes Through Changes in the Past Few Weeks
Over the past few weeks, the stablecoin market has undergone significant changes, including the depegging event on March 11 which resulted in the removal of over 7 billion USDC stablecoins from circulation. Following the depeg, USDC and other stablecoins have been re-pegged, and Circle’s stablecoin is currently trading at $1 on several centralized trading platforms as of March 18.
De-peg Causes Sell-Off
During the de-peg, USDC hit a price point of $0.877 per coin alongside six other stablecoins which also lost their dollar peg. Nonetheless, USDC and the other stablecoins have since reattained parity with the dollar—with Circle’s stablecoin trading at $1 on several centralized trading platforms since March 17. On March 6, roughly 43.89 billion USDC was in circulation. On March 17, 7.08 billion USDC was redeemed—falling by 10.2% over 30 days, according to on-chain data by CoinGecko.
BUSD Also Retreats
On March 17, BUSD’s 24-hour global trade volume across different exchanges was $8.2 billion. Over the last 11 days, 439 million BUSD has been redeemed. During that time, the amount of BUSD in circulation decreased to 8.2 billion from 8.6 billion. Per Nansen’s proof-of-reserve data, Binance currently holds 7.42 billion BUSD. According to Coin Gecko’s stablecoin market data, the number of BUSD in circulation has decreased by 46.3% over the past 30 days, which analysts attribute to the SEC’s decision to serve Paxos—the US issuers of BUSD—a Wells Notice last month, prompting both Binance and Paxos to distance themselves from the stablecoin.
Tether Picks Up Supply
Between both the USDC and BUSD liquidations over the last several weeks, the largest stablecoin by market capitalization, Tether (USDT), has experienced an 8.7% increase in the number of coins in circulation. Tether currently holds an overall market valuation of approximately $75.29 billion, with 75.17 billion USDT in circulation. On March 17, Tether’s global trade volume of $80.38 billion exceeded that of every other coin in the entire crypto-economy in terms of 24-hour settled trades. BUSD and USDC possess the second and third-largest stablecoin volumes, respectively.
In conclusion, the stablecoin market has seen many ups and downs in recent weeks, and the impact of it on the crypto market is still to be seen. However, Tether’s rise in circulation could be indicative of more stablecoins being eventually replaced by Tether, which is the largest stablecoin by market capitalization. Additionally, the market needs to be watched carefully to monitor the potential impact on the crypto market.