During the Crypto Winter, Investors Hide a Part of Their Bull Market Profits stable coins To wait out the recession.
But in the last two months – via Terra’s UST stablecoin fall downpanic at a potential The bank runs on crypto lending company Celsius, And Insolvency Three Arrows Capital for Crypto Hedge FundsBearish behavior has played out very differently for the two largest stablecoins by market capitalization: Tether (USDT) And US Dollar Coin (USDC),
Tether’s market cap has fallen 19% since the beginning of May, when it set a new all-time high of $83 billion, USDC gained 5% and hit an all-time high of $56 billion. decrypt Analysis using CoinGecko data. This means that the supply of Tether has been declining sharply since May – a sign that large investors have been cashing in on their USDT positions since the market crash – while the supply of USDC has increased, reflecting rising demand. gives suggestions.
This has been a remarkably strong run for USDC. Circle’s stablecoin has set a new all-time high 28 times over the past 50 days. In fact, this is done every day from June 15 till tomorrow. On Tuesday afternoon, the gap between USDC and Tether had narrowed to around $12 billion. It is the smallest since the fall of 2020.
Now, if Tether’s market cap rises by about 21%, USDC could pull up with Tether too – soon, if Tether continues to lose ground. But all this has a very serious caveat: It is dangerous, especially now, to assume that an asset’s past performance guarantees what it will do in the future.
stable coins Such as Tether and USDC are commonly used by traders to enter and exit trades for other cryptocurrencies, particularly in situations where the US dollar is inaccessible and on decentralized exchanges, such as uniswap, These stablecoins account for a significant percentage of daily trading volume in the crypto market, often exceeding the combined volume. Bitcoin, Ethereumand the remaining top 10 coins by market capitalization.
But since the beginning of May, Tether has seen its circulating supply – excluding coins available to the general public, private sale or company-held – drop to 15 billion. In the second week of May, when things were really falling apart for Terra and all kinds of stablecoins were heating up, Tether holders cashed in $7 billion worth of stablecoins for cash. After USDT Briefly Loses Its Dollar Peg,
This could be a sign that investors have lost so much faith in crypto that even stablecoins are starting to seem like a risky investment.
However, Paolo Ardoino, Tether’s chief technology officer, said that it shows the company is capable of handling these kinds of tasks. Redemption “without blinking an eye.” Tether appears to have paid out another $8 billion since then. But there has been some controversy over whether the $4.5 billion sent to crypto exchange Bitfinex yesterday was burned, meaning it was taken out of circulation as it was redeemed for cash, or simply Tether’s. was transferred to the sister company.
Paolo claims that 4.5 billion USDT tokens sent to Bitfinex were burned and not transferred.
But the Blockchain Shows They Was Actually Transferred to Bitfinex
Please consider what is wrong with this allegation. pic.twitter.com/B3jm6YxBzx
— paperhand (@philnick567) 20 June 2022
Tether spokesperson said decrypt The 24-hour stablecoin, at $48 billion, compared to USDC’s $5 billion at the time of this writing, is a sign that it has greater utility than its competitors, adding that its falling market cap is evidence that its reserves There is enough liquid to handle the cash. Redemption.
“For example, instead of catering to the traditional banking industry, Tether is focused on being the currency most commonly used for peer-to-peer exchanges, remittances, a tool of freedom and inflation hedge for developing countries,” spokesman said in an email. “This is why, while Tether’s market cap has shrunk due to the easy billions of cash redemptions we have facilitated over the past several weeks, Tether’s 24 [hour] The trading volume is almost 10x higher than that of its closest competitors.”
Circle, the consortium that issues USDC, did not respond. decryptComment request.
While USDT and USDC are not without competition, they are easily the most influential in the stablecoin category. According to CoinGecko, their combined market cap on Tuesday is 79% of the total stablecoin market capitalization of $155 billion. The third largest stablecoin, Binance USD (BUSD), has a market capitalization of $17 billion.
According to CoinGecko, at the start of the year, Tether’s market cap is $78 billion, almost double that of USDC’s $42 billion. Needless to say, a lot has changed for USDT and USDC, the third and fourth largest cryptocurrencies by market cap after Bitcoin and Ethereum.
In early May, when Terra’s UST stablecoin lost its peg, there was a rush to draw a line in the sand between algorithmic stablecoins like UST and centralized stablecoins that hold cash or cash equivalent reserves like USDT and USDC. returned their coins with
“Tether holders should feel very secure that Tether will keep its peg as it is dollar-backed and not influenced by market forces,” said Tether co-founder Reeve Collins. decrypt In an email on May 10, when things were It’s starting to look bad for TerraUSD, “I would not be surprised to see an increase in holders of algorithmic stablecoins starting to move their money to asset-backed coins such as Tether.”
Two days later, panic over the UST recession intensified and Tether is briefly $0.95. fell toBefore reclaiming its 1:1 peg with the US dollar, according to CoinMarketCap data.
The same day, Circle’s chief strategy officer, Dante Disparte, published a blog post that appeared to to embrace victory At a cost that he called “an instrument disguised as a stationary”.
“If you want to have dollar context and create a price parity that fights buyer and spender remorse, you really need to have high quality liquid assets (HQLAs in banking parlance) that are dollar denominated. and are inside the regulated banking system.” he has written,
USDC made it through the Terra crisis without falling below $0.99. But it briefly lost its peg last Monday, a day after Celsius announced it was frozen accountsAccording to CoinGecko, when it fell to $0.97.
Last week, Tether issued a statement dismissing the “label”false rumors“regarding the part of its cash reserves which are being held in corporate paper, or are owed thereto by institutional borrowers. Tether took some heat last year for placing a substantial portion of its cash reserves in commercial paper.
In September 2021, Chinese real estate developers Evergrande and Casa were in danger of missing a US dollar bond payment – the type of commercial paper that made up $30.6 billion of Tether’s $69 billion reserve at the time.
Since then, the company said it has further reduced its commercial paper holdings. In an assurance report, the company’s accounting firm said commercial paper and certificates of deposit represented nearly one-quarter of its $82 billion as of March 31, 2022.
Last week’s statement also attempted to put some distance between Tether and crypto lender Celsius, which is trying to prevent a bank run, and potentially bankrupt hedge fund Three Arrows Capital.
Tether has “zero exposure to Celsius other than a small investment made out of Tether equity in the company,” the statement said. It also said it does not have “lending exposure” to Three Arrows Capital, which is struggling to work with its creditors to avoid liquidation. Co-founders Kyle Davis and Su Zhu told wall street journal He lost $200 million in a fall in Terra’s pit in May. At one point it managed an estimated $10 billion, but by April had managed about $3 billion.
Rapidly changing markets, for good or bad, are lighting up for the two biggest stablecoins.
According to CoinGecko, the gap between Tether and USDC was the highest compared to last year on May 17, 2021, with USDT having a market cap of $59 billion, nearly four times USDC’s $17 billion.
May 2021 was the start of a turbulent period for the crypto markets, which will eventually see the global crypto market lose 9% in 24 hours On 23 May 2021.
At the time, there was bad news hurting crypto prices: Tesla CEO Elon Musk announced that the company stop accepting bitcoin, Top cryptocurrency exchanges, including Binance and Coinbase suffered a loss, and regulators in China began to intensify efforts stop bitcoin mining operations across the country.
A week later, on May 23, 2021, Tether’s market cap was virtually unchanged, but USDC had added $4 billion to its market cap. Tether was still far and away the biggest stablecoin, but over the course of a week it had beaten USDC by a factor of four to a factor of three.
As long as both stablecoins have existed, Tether’s market cap has generally been several times larger than that of USDC. but that’s changed now—and potentially for good.
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