Parallel Updates on USDT - USDC - DAI - FDUSD - PYUSD Stablecoins on August 8, 2023

In just a few days, the cryptocurrency market has witnessed a series of significant fluctuations concerning the stablecoin segment. Join Coin68 as we update you on the latest developments in the stablecoin battle.

Updates on USDT - USDC - DAI - FDUSD - PYUSD

Note: Apart from the official statements provided by project representatives, the remaining information and opinions are unverified and for reference purposes only.

USDT
Starting with Tether (USDT), as reported by Coin68, following the incident with Curve, USDT began depegging last weekend when a large amount of stablecoins were dumped into liquidity pools on Curve and Uniswap.

• Details: USDT depegged due to sell-offs on Curve and Uniswap

This is not the first time USDT has depegged in 2023. Back in June, the largest stablecoin in the cryptocurrency market depegged to $0.9959 due to negative information surrounding confidential documents released by the New York State government regarding the 2021 Tether lawsuit. In March, USDT also depegged but rose to $1.0077 due to the fallout from the USDC competitor during the US banking crisis.

However, the current depegging of Tether continues without signs of resolution, as the USDT price dropped to $0.9978 on the evening of August 7, the lowest since the collapse of FTX in November 2022.

USDT price fluctuations from August 2022 to August 2023. Source: CoinMarketCap

The share of USDT in Curve's 3pool reached over 70% on the evening of August 7 before temporarily dropping to 64.92% at the time of this update.

Asset allocation in Curve 3pool as of 11:11 AM on August 8, 2023. Source: Curve

On the morning of August 8, Tether's Chief Technology Officer, Paolo Ardoino, posted the latest update on USDT, affirming that the company successfully processed withdrawal requests totaling $325 million the previous day.

Ardoino also responded to criticism regarding Tether's complex withdrawal procedures, calling them necessary to meet banking standards and avoid legal complications.

Despite this, questions remain about why Tether is taking considerable time to restore USDT pegging and the minimal amount of money converted, unlike previous depegging incidents where the company boasted the ability to convert billions of USD in assets within days.

The delay could be attributed to the company's investment strategy. In its Q2 2023 asset verification report, Tether revealed holding up to $73 billion in collateral assets for USDT in the form of US Treasury bills, while cash reserves are only $90 million. While US Treasury bills are considered cash equivalents, Tether's need to hold them through intermediary banks could be delaying conversions, as banks do not operate on weekends - a suitable time for USDT attacks.

Assets held by Tether as of June 30, 2023. Source: Tether

On August 4, Ardoino also hinted at the speculation that USDT was under some pressure, and its main competitor, USDC, would benefit from this situation as more people hold it. At the same time, a competitor that emerged two days ago [hinting at FDUSD] is receiving everything? This is definitely true and not manipulated.

USDC
Similarly, CEO Jeremy Allaire of Circle - the company issuing USD Coin (USDC) - updated the project's status on Twitter on August 8.

More: What is Tether?

Accordingly, Allaire reported that in the past month, Circle had injected an additional $5 billion USDC into the market while withdrawing $6.6 billion USDC. The CEO also reiterated that Circle holds collateral assets for USDC in the form of financial products regulated by the US SEC, and the assets are audited monthly by Big4 firm Deloitte.

Allaire also affirmed that USDC operations continue as usual, without issuance or redemption fees for stablecoins.

Returning to reality, what most investors in the cryptocurrency market point out is that the market capitalization of USDC has been plummeting since March 2023, dropping from $44 billion to $26 billion at the time of writing.

Market cap fluctuations of USDC from January 2023 to August 2023. Source: CoinMarketCap

Alongside the reason for the severe decline in trust in USDC due to the March depegging, another hypothesis is circulating that USDC is being "drained" through USDT.

Hypothesis of Binance selling USDC
Accordingly, USDC is a tool used by many giants like Binance to reduce exposure to large stablecoins like USDT and USDC itself. Binance initially planned to convert the stablecoin balance on this platform into BUSD - the platform's official stablecoin.

However, after BUSD was requested to cease issuance by the US government in February 2023, and USDC was depegged a month later, Binance decided to change its strategy and reduce all exposure to USDC. As can be seen in the figure below, the amount of USDC held by Binance (taking USDC held on the exchange - customers' USDC) reached its peak of $3.48 billion on March 1, before shrinking to $302,813 USDC by early June.

Asset statistics on Binance, compiled from Proof of Reserves data. Source: @sasadjak72 on Twitter

During the same period, the amount of BTC, ETH, and USDT held by the exchange increased, indicating that Binance had "run away from USDC" to switch to other currencies. By May 2023, the exchange sold BTC and ETH, bringing their balances back to approximately pre-March levels.

Hypothesis of USDC being "drained" by USDT
Another hypothesis about why USDC's market cap is continuously declining while USDT has been reaching new highs since March is that USDC is being manipulated by competing parties.

An account has suggested a scenario where Tether or some organization profits from issuing USDT, then swaps USDT for USDC, exchanges USDC for USD (fee-free), then uses the money to issue USDT again, swaps for USDC, withdraws USDC to cash, and repeats the loop.

This general model would weaken USDC while benefiting USDT.

Additionally, USDC is also being used as an off-ramp for many organizations, as at least according to Sam Kazemian (Frax Finance founder) and Evgeny Gaevoy (Wintermute market maker CEO), it's not easy to convert USDT to cash at the moment. (Gaevoy's Twitter post has been deleted.)

from the @fraxfinance governance board

apparently nobody can really redeem $USDT pic.twitter.com/RIOYtX0VFf— Napgenus ursus?? (@napgener) August 7, 2023

DAI
After a long period of stagnation, the entity behind Dai (DAI) - the largest decentralized stablecoin in the cryptocurrency market at present - Maker, announced on August 7 that it was increasing the deposit interest rate for DAI to 8%, supported on the Spark Protocol lending protocol.

However, this is only a nominal interest rate and will automatically adjust downward as the amount of funds deposited into the Spark Protocol gradually increases, according to Maker founder Rune Christensen.

This information has led to an increase in DAI usage, as evidenced by the surge in newly minted DAI and the sudden increase in funds deposited into the Spark Protocol.

According to data from makerburn.com, the amount of new DAI minted in the past 48 hours has surged by $400 million, increasing DAI's market cap from $4.4 billion to $4.8 billion.

Fluctuations in circulating supply of DAI over the past 3 months. Source: makerburn.com

During the same period, Spark Protocol's Total Value Locked (TVL) increased from $58 million to $185 million, according to DefiLlama.

Fluctuations in Spark Protocol's TVL since its launch in May 2023. Source: DefiLlama

However, Spark Protocol has also sparked controversy by not allowing users from the US and some countries (including Vietnam) to use it, while also blocking VPN connections.

Spark Protocol is part of the project's Maker-DAI resurgence plan, collectively known as the "Endgame Plan." As previously reported by Coin68, the Endgame Plan will consolidate the identity of MKR-DAI, establish subDAOs, change governance models, establish a dedicated layer-2 for the project, and make other changes.

FDUSD
As reported by Coin68, First Digital USD (FDUSD) is the latest stablecoin being promoted and integrated by Binance.

Half a month after its launch, FDUSD reached a market cap milestone of $291.7 million, with $266.7 million on Ethereum and the remainder on BNB Chain. However, the majority of the issued funds remain in exchange wallets controlled by Binance, rather than being widely distributed.

FDUSD smart contract on Ethereum as of August 8, 2023

FDUSD smart contract on BNB Chain as of August 8, 2023

In the latest AMA session, Binance CEO Zhao Changpeng (CZ) revealed the exchange plans to convert a portion of the circulating supply of Binance USD (BUSD) to FDUSD by 2024, in conjunction with its series of pre-eminences to USDT.

FDUSD supply and deposit data on August 8, 2023

In its marketing communications, FDUSD claims to be more transparent and secure than USDT and USDC. The team explained the importance of selling through for the integration with Binance.

The article was provided by jasey on @juradee_polo channel on @most_AceA and can be found at Crypto1.io!