Stablecoin Markets Shift as Binance Begins USDC Conversions

Binance conversions from Circle’s USDC, Paxos’ Pax Dollar, and TrueUSD to the exchange’s own stablecoin, Binance USD, have begun. And the effects on stablecoin market are already being felt.

Since Binance announced that it would stop supporting competing stablecoins on its exchange, the world’s largest by volume, USDC Binance releases– that is, the number of USDC stablecoins leaving the exchange – increased by 93%. Meanwhile, USDC’s market cap fell 5%.

As of Wednesday afternoon, $26 billion worth of stablecoins were sitting on Binance’s exchange, according to blockchain analytics firm Nansen. Of that, $20 billion was in BUSD, with the rest in competing stablecoins: $683 million in USDC, $48 million in USDP, and $283 million in TUSD.

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The only other large stablecoin balance on Binance was $5 billion. Attached (USDT), according to Nansen.

As of Monday, users were able to start converting their soon to be delisted stablecoins into BUSD at a rate of 1:1. But starting tomorrow, the exchange will automatically convert all remaining USDC, USDP, and TUSD balances into its own stablecoin, according to a blog post.

Although Binance’s announcement named three of its competitors, much of the attention focused on USDC. It is the second largest stablecoin by market capitalization and has consistently outperformed BUSD.

Neither Binance nor Circle, the issuer of USDC, responded to a request for comment from Decrypt. But there are still signs in the exchange data that show how conversions have already impacted the stablecoin landscape.

When Binance announced the move at the beginning of the month, it created a lot of commotion.

That’s because the crypto exchange is by far the largest by volume, having completed $23 billion in trades in the past day. When the announcement was made, Twitter user “BloodgoodBTC” likened it to a crypto monopoly, saying the exchange was “removing competitors like Google did 10 years ago.”

Meanwhile, voice critic Tether and Bitfinex “Bitfinexed” hypothesized that the conversions should show a decline in USDC issuance and an increase in BUSD issuance.

Since the two stablecoins are supposed to maintain a 1:1 parity with the US dollar, and Paxos and Circle burn coins as they are redeemed, their issuance can be approximated using their market capitalization .

Sure enough, USDC’s market capitalization has fallen to $49 billion since Binance’s announcement earlier this month. During the same period, the market capitalization of BUSD increased by 8% to reach $21 billion, according to CoinGecko.

Binance CEO Changpeng Zhao and Circle CEO Jeremy Allaire were adamant that automatic conversions did not amount to delisting from USDC. For his part, Zhao said on Twitter that users can still deposit and withdraw USDC from the exchange. “Best price, lowest slippage for all users,” he said.

Furthermore, Allaire stated in a Twitter feed the day after it was announced that the change “will likely lead to more USDC flowing into Binance.”

In it, he took a side hit on competitor Tether, Tweeter this “USDT is NOT a cash equivalent – ​​not even close.” He also argued that since the use of BUSD outside of Binance is so limited, it make USDC the preferred stablecoin to move funds on centralized and decentralized crypto exchanges.

The latest trading day shows that BUSD is mostly trading on Binance, according to data from CoinGecko. The three most popular BUSD trading pairs were Bitcoin, Ethereum, and Tether on Binance’s own exchange, and they accounted for 65% of the volume of the entire stablecoin.

Meanwhile, centralized exchange MEXC Global’s BTC/USDC trading pair was the most popular stablecoin market over the past day, accounting for $747 million, or 17%, of trading volume. USDC. And the soon-to-be-deleted BTC/USDC trading pair on Binance accounted for 4% of USDC volume, according to CoinGecko.

There have also been signs of change in currency outflows, according to blockchain data firm IntoTheBlock.

After Binance’s announcement, Binance’s USDC outflows increased.

Binance’s USDC outflow volume increased by 93%, from $158 million at the end of August to $307 million. And the number of outgoing transactions increased by 77%, from around 1,100 to around 1,800 transactions, according to IntoTheBlock.

That brings the cumulative September total to $19 billion across 44,314 deals, up from $18 billion in August.

These exits, said Lucas Outumuro, head of research at IntoTheBlock, could be users who don’t want their USDC converted to BUSD.

“But as far as I know, Binance doesn’t actually convert them, so it’s not like they’re pulling USDC from clients and sending BUSD inflows,” he said. Decrypt. “It is likely to increase BUSD liquidity in the longer term, taking advantage of Binance’s strong position. In the short term, this might not make such a big difference given that, as I mentioned, Binance doesn’t actually convert assets.”

But to put the outflows into perspective, this is a modest increase from the amount of USDC that was withdrawn from Binance in May and June.

Data from IntoTheBlock shows that these two months were the highest and second highest months for Binance’s USDC outflows since 2018, when the exchange added the stablecoin.

Users withdrew $50 billion worth of USDC from the exchange in May and $30 billion in June, while the collapse of TerraForm’s algorithmic stablecoin TerraUSD and governance token LUNA rocked the market.

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Stablecoin Markets Shift as Binance Begins USDC Conversions

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