FTX Fraud Pushed Traders Into Stablecoins: Galaxy

USDT was the dominant leader in stablecoin trading volume, but a competitor has now surpassed it

article-image

Blockworks Exclusive art by axel rangel

share

As risk-off sentiment continues to dominate cryptocurrency trading patterns, investors are putting more money into what they hope is a safe haven: stablecoins. Stablecoin trading volume has been on the rise since news of FTX’s collapse broke and fears of contagion rocked the industry.  

Daily stablecoin trading volume surpassed $200 billion on Nov. 5, when concerns about FTX’s liquidity spiked, and on Nov. 8, when it looked like Binance might buy FTX, according to data from CoinGecko. Stablecoins USDT and BUSD led the volumes as the deal collapsed and FTX headed for bankruptcy.

But of the two, BUSD volume is the one surging, according to Galaxy Digital, in a report published Friday.

“Historically, USDT has been the dominant leader in stablecoin trading volume as it is the underlying currency to quote trading pairs at several large exchanges,” Charles Yu, research associate at Galaxy Digital, wrote. “The large increase in BUSD trading volume could be due to Binance’s decision to consolidate its order books and convert user balances in several stablecoins (incl. USDC, USDP, & TUSD) to BUSD as of September 29th.” 

As investors continue to fear for security and liquidity, traders have moved funds off of centralized exchanges, Yu noted.  

“According to Nansen data, FTX and FTX US collectively hold $78m in stablecoins on Ethereum, down [about] 40% since November 6,” Yu said. “Binance is the largest holder of stablecoins on Ethereum with [roughly $25 billion], about 10x the balance of its closest CEX competitor (OKX) and over 80x the balance of Coinbase.”

As the liquidity crisis continues, some exchanges have temporarily suspended deposits or withdrawals of USDC and USDT issued on the Solana blockchain, including Crypto.com, OKX and Binance, which has since reopened deposits for USDT. 

Circle, the company behind USDC, reported that it had miscalculated its financial projections in a Nov. 14 SEC filing. Circle’s issuance dropped $3 billion, the company said, a drop that can be attributed to Binance’s USDC to BUSD auto-conversions and FTX’s implosion.

“Stablecoins issued by crypto exchanges, major existing global payments companies and banks, and decentralized algorithmic tokens, are likely to increase competitive pressure on Circle stablecoins, and could slow our growth, or cause significant declines, negatively impacting the financial outlook of the company,” the filing read. 

At least one positive takeaway from this recent turmoil is that stablecoin systems have proven to be functional as issuers continue to process redemptions in an orderly fashion and any depeggings have been slight and temporary, Yu noted. 

“In May, we saw massive outflows from USDT to USDC from peg risk,” Dan Smith, research analyst at Blockworks, said. “We see the same thing again more recently, on a much smaller scale, but this time BUSD is getting some of the love.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

recent research

Research Report Templates (1).png

Research

Solana Mobile is a highly ambitious foray into the mobile consumer hardware market, seeking to open up a crypto-native distribution channel for mobile-first applications. The market for Solana Mobile devices has demonstrated a phenomenon whereby external market actors (e.g. Solana-native projects) continuously underwrite subsidies to Mobile consumers. The value of these subsidies, coming in the form of airdrops, trial programs, and exclusive NFT mints, have consistently covered the cost of the phone and generated positive returns for consumers. Given this trend in subsidies, the unit economics in the market for Mobile devices, and the initial growth rate and trajectory of sales, it should be expected that Solana mobile can clear 1M to 10M units over the coming years. As more devices circulate amongst users, Solana Mobile presents a promising venue for the emergence of killer-applications uniquely enabled by this mobile-first, crypto-native distribution channel.

article-image

Plus, breaking down Donald Trump’s shifting crypto stance

article-image

Markets are holding relatively steady despite the supply shock

article-image

Analysts are looking ahead to August, a historically volatile month made more interesting this year by the US presidential election

article-image

Plus, a look into Lighting Labs’ newest feature

article-image

Crypto’s Wild West era is over — it’s time to embrace regulation to secure the future of digital assets

article-image

Plus, Solana has now surpassed Ethereum in trailing 30-day decentralized exchange volume