A report into crypto’s capital flight

important point

  • Stablecoin balances on exchanges hit two-year low
  • Over the past five months, more than half of the exchange’s stablecoin balances have been exfiltrated. This equates to him $22.8 billion.
  • Government Bond Yields Above 5% Give Investors A Viable Option, Capital Fleeing Stablecoins
  • BUSD closed, USD coin caught in SVB collapse also pushed money out
  • Tether Has The Highest Market Share In Two Years Since FTX Collapsed Six Months Ago Despite 30% Of Exchange Supply Heading To The Exit Door

A few months ago I deep dive Analyze the flood of stablecoins leaving exchanges.

As of today, Exodus shows no signs of slowing down. Over half of the total stablecoin supply on exchanges has leaked in five months. This is his $22.8 billion.

As the chart above shows, the outflow began in the fourth quarter of last year. This was done following the collapse of FTX. During this period, Binance came under heavy fire for how opaque its operations were.

Some spills are easy to explain. In February, the SEC, the issuer of BinanceUSD, was sued by the SEC for violating securities laws. This means that there will no longer be a Binance branded stablecoin, and its market capitalization will gradually drop to zero.

USD Coin, a US-based stablecoin issued by Circle, also had problems. First, being based in the US, there was concern that regulators would knock for the same reason his Paxos fired. But more dramatic was the collapse of the Silicon Valley Bank, where 8.25% of the reserves backing USD Coin were held by the failed bank.

The SVB debacle, which ended with the US government guaranteeing deposits, temporarily lowered the USDC peg to 92 cents, amplifying the outflow of the already declining USDC market capitalization.

In fact, all major stablecoins have seen significant outflows from exchanges compared to before FTX collapsed in November.

Tether gains market share

Even Tether saw a massive outflow, with balances dropping by 30%.This is despite the fact that the world’s largest stablecoin is growing even more dominant in terms of market share and, as analyzed in our previous analysis, currently has the largest share in over two years. increase data piece.

My in-depth research two weeks ago assessed the impact of Tether’s dominance on crypto as a whole, and while its market share may be growing, its balance on exchanges is still declining. , just like any other stablecoin space.

In fact, it goes beyond stablecoins. Elsewhere in cryptocurrencies, liquidity is also thin.Bitcoin supply on exchanges at least Since the bull market peak in 2017. Ethereum is no different. Your ETH balance is 5 year low.

This makes sense when we take a step back and look at what happened in the crypto space.

Multiple scandals rocked the industry, including LUNA, Celsius, and FTX. Regulators are moving quickly against some of the industry’s biggest players. And most harmful is the broader macro environment. Last year, the Nasdaq lost his third of its value, posting its worst return since 2008. Bitcoin was just launched in 2009.

By knowing what happened to Treasury yields, you should have a clear picture of what happened to liquidity. After all, raising rates slows the economy, draws liquidity out of the system, and helps keep inflation in check.

With Treasury rates soaring from 0% to over 5%, is it any wonder that liquidity is pouring out of a space as scandalously rocked as cryptocurrencies?

“Liquidity has evaporated from the entire crypto space,” said Max Coupland, director of Coinjournal. “Government bond yields are above 5%, but institutional investors are holding back investment after the FTX and LUNA scandals. The general story is that cryptocurrencies are establishing themselves as a mainstream asset class. Nonetheless, the data suggests that money is moving in diametrically opposite directions.

Low liquidity means high volatility

On the flip side of this, thin liquidity means that price moves quickly, emphasizing both upward and downward moves. This is a contributing factor to our run-up so far this year.

Prices started to rise again as the market shifted to a more bearish forecast on the future path of interest rates. In cryptocurrencies, this is positive, with Bitcoin up 68% so far this year and most other coins as well.

Declining supply of both Bitcoin and stablecoins on exchanges means that volatility is declining. get taller naturallyWhile the market is currently riding a wave of optimism that rate hikes are coming to an end (if only due to bank wobbles proving the whole system is on the brink), this upward momentum can easily be reversed.

Also, low liquidity makes it impossible to stop a runaway train. It doesn’t matter which way it goes.

If you use our data, we would appreciate a link to https://coinjournal.netYou can continue to provide data analytics research by crediting our work with links.

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