The whole provide of stablecoins noticed its sharpest drop in historical past throughout Q2 2022, with stablecoin redemptions spiking on account of “short-term liquidity and concerns about insolvency that were not present during the panic of 2020,” according to data analytics firm Coinmetrics.
CoinMetrics head of research and development Lucas Nuzzi highlighted the data via Twitter on June 16, with a graph showing the total supply of stablecoins since January 2020.
“22Q2 is the first time in the history of stablecoins where Total Supply decreased. Even if we exclude UST, over 10B has been redeemed *directly from the treasuries* of major issuers.”
The record included DAI, USDT, OMNI and TRON, SAI, USDK, PAX. While Circle’s USDC and Binance’s BUSD have been compiled in a separate graph. Terra’s authentic variant of UST was not included within the graph.
22Q2 is the primary time within the historical past of stablecoins the place Total Supply decreased.
Even if we exclude UST, over 10B has been redeemed *immediately from the treasuries* of main issuers
— Lucas Nuzzi (@LucasNuzzi) June 15, 2022
Nuzzi famous that Tether noticed probably the most redemptions of all centralized stablecoin issuers, with 7 billion of the full USDT provide wiped off the board in April and May, and is prone to have been brought on by actions of some, quite than any important market-wide actions.
“The sharpness of that decrease suggests that a single entity, or small cohort, was behind it,” he mentioned.
The implosion of the Terra eco-system together with its native LUNA token and UST stablecoin in May coincided with Tether’s USDT de-pegging from the U.S. greenback by round 5%. As a end result, round 7 billion USDT was redeemed as large gamers seemed to exit the market and keep away from any additional potential carnage.
Another venture to take a giant hit was MakerDAO’s DAI, which noticed 40% of its provide retired on account of the “largest liquidation event of its history.”
USDC and BUSD have been additionally included in a separate graph, and in addition present a pointy drop in provide of round 5 billion in May, nevertheless, each have since rebounded and are near being again to their respective all-time excessive ranges of round 65 billion and 48 billion a pop.
Related: DeFi contagion fears and rumors of Celsius and 3AC insolvency may weigh on NEXO worth
The distinctive market situations of 2022 provide a possible rationalization as to why stablecoin customers have been taking threat off the desk over the previous few weeks.
So far, the crypto sector has seen the Terra eco-system trigger a crash value round $40 billion, whereas lending platform Celsius and enterprise capital agency Three Arrows Capital have additionally been preventing to keep away from insolvency due partially to reported liquidations, publicity to Terra, declining asset costs and doubtlessly unsustainable enterprise fashions.
Tether, which can be uncovered to Celsius by way of $10 million fairness funding in 2020 and a $1 billion mortgage it gave to the corporate final 12 months, issued a press release on Monday noting that the plummeting worth of Celsius native token and the agency’s liquidity troubles may have “no impact” on its reserves.
The agency said that its lending exercise with Celsius has “always been overcollateralized.”