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i wrote deep dive Last October, we analyzed the stablecoin wars. Things have happened… so it’s time to give it a serious update.
At the time, the biggest profitable horse was none other than Binance’s BUSD. Binance, the flagship product of the largest exchange on the planet, has significantly strengthened its market share by delisting several other stablecoins from exchanges, including USDC.
We also announced an automatic conversion of customer holdings from USDC to BUSD, and to be honest, I was surprised that this move didn’t anger people that much.
anti-competitive? Absolutely, of course. But nonetheless, it was a strong business move and BUSD got a nice kick behind it. The chart below shows how it grew as a result.upper left[]Click to see that you are battling market share from your competitors.
But this week there was a knock on the door. who’s knocking? SEC.
We believe the SEC sue paxos, will issue and manage the BUSD stablecoin. Violation of good old security laws seems to have angered them.
Paxos will no longer issue the BUSD stablecoin. So the 7th largest cryptocurrency in the world and the 3rd largest stablecoin will die.
Well, kind of like a fade out. Paxos has confirmed that he will be allowed to redeem BUSD until at least February 2024, but no new tokens will be created. With one-third of its volume going through BUSD, Binance is phasing out the BUSD pair in favor of other stablecoins.
Despite Paxos assurances that all tokens are backed by reserves and have passed the necessary audits, BUSD has fallen off the $1 peg. It reached $0.995 shortly after Monday’s announcement.
However, it has since recovered and is seizing opportunities for small spreads without running out of arbitrageurs. .
Let’s be clear. The Binance peg is fairly stable and the market isn’t really afraid of its health. In fact, looking back at BUSD’s history (are we already talking in the past tense?), the peg has never really been an issue.
The chart above shows that traders have already said goodbye to BUSD. Paxos has already cashed over $1 billion in his BUSD since the announcement.
Binance will be fine. Sure, their global acquisition ambitions may have backed off a bit, but they’re only upending the rest of the stable. Confirmed that we will continue to support BUSD and acknowledged that we expect users to migrate to other stables over time.
https://twitter.com/cz_binance/status/1625067495760560128
Zhao later elaborated on the incident on Twitter Spaces, putting a noticeable distance between the exchange and BUSD.
BUSD is not issued by Binance, said Zhao. “We have a deal to let (Paxos) use our brand, but it wasn’t created by us.”
With BUSD gone, BUSD will slowly settle down over time and we will continue to work with more stablecoin issuers or creators, Zhao said. Translation: Expect USDC to return to the Binance screen and increase Tether share.
So what about the rest of the gang? Should they shudder as regulators crack down on the industry as a whole? Or should we pop next to champagne because market share is inevitable?
Well, it depends.
Other US-based stables may be involved. USDC issuer Circle is desperately assessing whether its product is now a security and whether regulators will take a hard look at it. I feel like he is one of the most frequently asked questions in this area. “What is a security?” And no one really knows. But hey, that’s the state of crypto and regulation right now.
Big winner? Tether. Tether, the most controversial coin in the space, has a significant advantage in that it is based offshore. And he’s already shown it by the fact that after this debacle his market capitalization jumped by his $1 billion in 24 hours.
USDT started trading in February with a market cap of $67.8 billion. Now he’s $69.5 billion.
USDT Market Cap, Feb via CoinMarketCap
BUSD share is not the only area where Tether is gaining momentum. USDC has also seen some outflows as investors fear it will be the next stage of the crackdown. Plotting the market shares of various stablecoins below, we can see that Tether is again over 50% of him.
So we are in a place where I have often criticized the cryptocurrency industry for being much more centralized than it was supposed to be, but more dependent on one party: Tether.
Of course, this is all the more concerning given Tether’s tumultuous history and ongoing concern over the reserves I’ve created. deep dive in the last year. Whatever your thoughts on this controversy, it’s hard to argue that the ongoing debate, and the lack of transparency that caused it in the first place, is unhealthy for the industry as a whole.
But for better or worse, that’s the current state of the industry. With much of the “decentralized” finance running in USDT, USDC, and other centralized stables highlighting how centralized the system is, there is a very real central point of failure. increase.
Its centralization was already severe, but the real concern arising from this deployment of BUSD is that it is about to become even more centralized.
The industry’s reliance on Tether is only going one way.
