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Binance BUSD Trading Volume Surges By 70%, What Is The Reason?

The introduction of stablecoins, like BUSD into cryptocurrency brought hope to many long-term investors. For those skeptical of the crypto space due to volatility, stablecoins become handy as their sailing means.

As the name goes, stablecoins are meant to remain stable to the real-time value of the fiat currencies they are pegged to. Also, some come pegged to tangible assets and cash that facilitate their stability.

But the collapse of the algorithmic stablecoin, TerraUSD UST, and its native token, LUNA, created a big hollow for stablecoins. It shifted the paradigm for lots of investors on what stablecoin stands for. The event brought massive losses to many investors and other crypto assets.

Thankfully, people have started warming up to stablecoins again lately. The Binance USD (BUSD), the world’s third largest stablecoin, is significantly impacting the crypto space. BUSD recorded a massive increase of about 70% on Tuesday in its trading volume. It remains the most considerable 24-hour trading volume recorded in recent times.

Binance Announcement Triggered BUSD Trading Volume

The sudden spike in trading volume for BUSD has raised lots of interest as people are looking for the potential trigger. The reason is not far-fetched, as Binance recently made a big public announcement.

Crypto total market cap trends downwards on the daily chart | Source: TradingView.com

Binance is laying out BUSD Auto conversion. At the moment, the firm mentioned that it would be for the existing balances of customers on the platform. The conversion process will be on USDC, TUSD, and USDP stablecoins.

Binance reported that it would be using a fixed ratio of 1:1 for the conversion. This process is to kick off by September 29, 2022. It noted that the new move is to increase liquidity and capital efficiency for its users. This will enable customers to trade conveniently with their consolidated BUSD balances on the platform.

Effect Of Binance Announcement About USDC

Further, in its statement, Binance mentioned that the conversion process would not affect withdrawals on its platform. However, the exchange will stop other USDC-related functions like leverage, spot, and payment.

Hence, BUSD witnessed a whopping rise of 70% in trading volume over the last 24 hours following the announcement. At the time of press, BUSD trading volume hit $8.4 billion with a market cap of over $19.4 billion. Similarly, the USDC trading volume increased by 20% over the last 24 hours to $7.06 billion.

To increase both the coverage and utility of BUSD, the Binance announcement came as a massive attack on USDC. As the second largest stablecoin, USDC boasts a market cap of about $51.8 billion. It is striving even to overtake USDT as the leading stablecoin.

After the fall of the Terra ecosystem, USDC has received lots of applause for having the best backing.

Featured image from Pexels, chart from TradingView.com

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Domino Effect On Stablecoins Leads To Reversal Of Growth Trend

The crypto bear market of 2022 has spared no digital asset in the space, and stablecoins have been no different. The assets which have always served as a safe haven for investors when it comes to the high volatility of the crypto market had seen a drawdown coming into the new year. As a result of this, for the first time, these stablecoins are now seeing a reversal of their otherwise bullish growth trend over the last couple of years.

Stablecoins See Market Cap Plummet

Stablecoins had grown tremendously throughout the bull market of 2021. By the end of the year, the year-over-year growth of the stablecoin market cap had actually come out to a total of $151.3 billion. This growth is attributed to the popularity among investors who were holding their funds in stablecoins, either from profits or waiting to buy more cryptocurrencies.

Related Reading | Bitcoin Dominance Dives As Ethereum Takes Up More Space

The top stablecoins had enjoyed most of this growth. Assets such as USDT and USDC saw their market caps grow by double-digits in billions, although they continued to fiercely compete with one another. This competition would, however, come out in the favor of USDC. Most of the support had sprung from the fact that USDC had more regulatory oversight compared to USDT, whose reserves continue to be questioned even to this day.

The year 2022 would prove to not be a good one for USDT too. It had come into the new year with more than $78 billion. But in the first half of the year alone, it has lost more than $12 billion to be sitting at its current market of a little over $66 billion at the time of this writing.

Stablecoin supply drops | Source: Arcane Research

USDC, on the other hand, is enjoying much success even through the bear market. Its market cap has added more than $10 billion this year alone, growing from $42.2 billion to $55.31 billion at the time of this writing. 

The Crash Of UST

A major factor behind the decline in the stablecoin market cap has been the crash of UST. By the beginning of this year, it was the largest and most popular algorithmic stablecoin, which is why the crash shook the market to the extent that it did.

Related Reading | Ethereum Classic (ETC) Reclaims $3 Billion Market Cap, More Upside To Follow?

Since then, the market cap of algorithmic stablecoins has dropped from $13.26 billion to around $3 billion. UST alone accounted for more than 94% of the decline after the crash, wiping off $9.7 billion from the crash. There was the crash of other algorithmic stablecoins such as DEI, but UST’s popularity and size made it the most prominent.

USDT market cap drops to $66B | Source: Market Cap USDT on TradingView.com

This has understandably led to reluctance on the part of crypto investors when it comes to using algorithmic stablecoins. As such, stablecoins such as USDT, USDC, and BUSD continue cot rule the market. However, the total stablecoin supply has been down 35.8% over the last six months. This can be regarded as a good thing, given that an increase in supply can often lead to a decline in value and vice versa.

Featured image from TRT World, charts from Arcane Research and TradingView.com

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Ethereum (ETH) Market Cap Falls More Than $124 Billion In Six Weeks

Ethereum, the second-largest cryptocurrency by market capitalization, is currently in freefall. Over $124 billion in capital vanished from the Ethereum (ETH) decentralized finance (DeFi) in six weeks.

Seven months ago, ETH reached its highest value ever at $4,891.70 on November 16, 2021. But it is now trading at around $1,100, which is less than 75.2% of its all-time high value.

Related Reading | Controlling The Chaos: FTX Exchange Bails Out BlockFi With $250M

The start of 2022 was unstable for the cryptocurrency market, particularly ETH, but in previous weeks, things have become much more complicated. However, the larger crypto market continues to fall due to macroeconomic uncertainty fueled by an unstable stock market, interest rate hikes, and the fear of crisis.

The Ethereum DeFi Market Is Deleveraging Dramatically

Glassnode, a blockchain analytics firm, released a report on June 17. The report was titled “The Great DeFi Deleveraging.” The report stated that over $124 billion in the capital had been drained out in only six weeks from the Ethereum DeFi market. As a result, its market value is deleveraging rapidly.

According to their statement, many reasons have sparked a wide range of margin calls, liquidations, and deleveraging. These reasons include worldwide monetary policy tightening, the growing strength of the US dollar, and decreasing values of risk assets.

Their analysis looks at some early warning signs that predict a drop in ETH usage and community demand after the November 2021 all-time high of ETH value.

They claimed that on-chain activity and Ethereum gas prices had decreased over six months. This indicates a drop in overall Ethereum network activity.

ETH is currently trading below $1,100 on the daily chart | ETH/USD chart from Tradingview.com

 As stated in the report:

Across many facets of the Ethereum ecosystem, the demand profile has been waning, with general application usage in decline, and network congestion easing after the Nov 2021 ATH, and a cooling off of NFT markets becoming evident in recent weeks.

TVL on Ethereum Dropped By 60%

According to the report, Ethereum’s TVL (Total Value of All Ether) dropped by 60% in six weeks. The decline occurred in two stages. In May, the Terraforms Lab’s project collapsed and caused a $94 billion loss. And in June, ETH fell below $1,000, resulting in a $30 billion loss.

By the report, there have only been two higher magnitude deleveraging events: 

The first being -46.0% associated with the recent LUNA collapse and -37.5% during the sell-off from the then-ATH set in May 2021.

The combined market valuation of the top four stablecoins USDT, USDC, BUSD, and DAI has now exceeded the market valuation of ETH by $3.0 billion.  

Related Reading | Why The Inventor Of Ethereum Attacked This Bitcoin Pricing Model

Glassnode stated that the deleveraging event taking place is painful and is similar to a mini-financial crisis. However, they added that although this is difficult, it provides an opportunity to eliminate excess leverage and rebuild healthily.

 

Featured image from Flickr and chart from TradingView.com

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Stablecoin Supply Near $200 Billion, Faster Growth Than Rest of Crypto

Stablecoin supply shows significant growth during the year. The market cap of the top stablecoins is roughly $181 billion, over 11% of the total crypto market, which is now at $1,6 trillion after shedding over $140 billion in the past two days over geopolitical concerns. Consequently, data shows that stablecoins are growing at a much faster pace than the crypto market this year.

Crypto total market cap at $1,6 trillion in the daily chart | Source: TradingView.com
Faster Than The Crypto Market

Having significantly accelerated their pace since 2020, data from Arcane research shows that stablecoins like USDT, USDC, BUSD, UST, and DAI are growing faster than the crypto market.

Tether (USTD) still takes the lead of all stablecoins with a 44% market share and a $79 billion market cap at the time of writing. USD Coin (USDC) follows reporting a market share of 29% and a capitalization of over $57 billion. Binance USD (BUSD) takes third place with a 20% share and $18 billion market cap. The following chart shows the total circulating supply near $200 billion.

The circulating supply of top stablecoins growing exponentially fast since 2021 | Source: The Arcane Research Weekly Update – Week 7

However, the stablecoin USDT has not reported a very active growth since the summer of 2021, growing merely 1% in 2022. On the other hand, USDC has been growing extremely fast since last year, reporting a 20% growth in 2022 alone.

By the end of 2021, Arcane Research had projected the fast growth of USDC to outshine USDT and eventually take its crown. Given the previous numbers, they are now projecting for USDC to become the largest stablecoin by market cap at the end of June.

Moreover, the algorithmic stablecoin Terra UST (UST) has seen a 19% growth over the year and DAI 9%.

Furthermore, while the crypto market’s Fear and Greed Index has sunk to the extreme fear area again, trader Byzantine General had noted that “Historically when tether dominance reaches 4.5% to 5% it marks a bottom on $BTC. Seems like sentiment reaches peak fear around that level.”

Byzantine General explained that “It’s considered bearish when USDT dominance goes up because it means people want to get out of coins and flee to something more stable.”

The chart shows Tether’s dominance at 4.5 on February 21 | By trader Byzantine General on TradingView

He further pointed out that “Some people think a high tether price and dominance is bearish. Some think the market cap increasing (because of new prints) is bullish .”

Related Reading | Stablecoins Total Market Cap Breaches $179 Billion Mark – Can It Go Higher?

Are Authorities Ready For A Giant Stablecoin?

Meanwhile, The Biden administration, the Federal Reserve System, and the Financial Stability Board have taken an unsurprisingly skeptical stance on stablecoins. They were right in the spotlight of the report Assessment of Risks to Financial Stability from Crypto-assets published on February 16.

In this report, the authorities claimed that “Crypto-assets markets are fast evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.”

“The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (CPMI-IOSCO) are coordinating with the FSB to determine regulatory approaches for GSCs, including those intended for use in mainstream payments.”

However, some experts believe that if stablecoins continue the fast pace of growth, they might become too big to fail thus proving concerns by the FED and FSB wrong.

Related Reading | Fed Chair Jerome Powell Argues Private Stablecoins Can Co-exist with US CBDC

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Total Cryptocurrency Market Cap Value Surges Across $1.9 Trillion Setting A New Record

The bullish trend in the cryptocurrency market is tolling a remarkable route in the month of August. For the first time since May, the industry is recording a total market cap that is almost $2 trillion.

The data from CoinGecko, a crypto data aggregator, indicates that the total crypto market value crosses $1.9 trillion a few days ago. This was after the market hit the mark since May 18.

Related Reading | Coinbase Removes USD Coin (USDC)” Backed By Dollar” Statement

From July 19, the entire crypto market experienced a considerable surge that pushes the total market value to about $700 billion. Nevertheless, the market is yet to attain its all-time high as of May 11. The value shows a deficit of about $700 billion from its peak of $2.5 trillion.

Other Cryptocurrency Assets Reacting To The New Market Trend

In the recent recovery trend in the industry, prominent digital assets such as Bitcoin (BTC) and Ether (ETH) are not left out. As a result, these cryptocurrencies have explored their mid-May market cap levels again.

As of Monday, Bitcoin records a market value of over $860 billion. CoinGecko reveals that it’s the first time since May 16 for BTC to hit such a limit. The cryptocurrency experienced a main sell-off earlier in the year. This was after Bitcoin became a $1 trillion asset.

However, the sell-off triggered the plummeting of the market cap to $560 billion by July 20. The recent rebounce of the BTC price over $45,000 brought over a 53% increase to its market value.

Similarly, the global second-largest digital asset by market cap, Ether, is not left out. The cryptocurrency accrued more gains in July since the bear market. The asset had almost an 81% increase from its July 20th value of  $204 billion to $369 billion.

After an incredible last week, the crypto market has taken a slight dip | Source: Crypto Total Market Cap on TradingView.com

On Thursday, the digital asset passed through a prominent network upgrade. The Ether price moved by 50% in response to the London hard fork. This displays investors’ anticipation of getting solutions to Ethereum’s high transaction fees through the upgrade.

Though the crypto market experienced a recent positive turning, some key cryptocurrencies somersaulted in their market cap value.

For instance, Binance USD (BUSD), a top-ranking stablecoin by market value after Tether (USDT) and USD Coin (USDC), had a drop.

 

Total cryptocurrency market cap 90-day chart

As listed on Thursday, BUSD couldn’t make it among the top 10 most-valued digital assets. UNI, Uniswap’s governance token, dethroned BUSD from the list. This left BUSD as the 11th-largest cryptocurrency with a market cap of $12 billion.

Related Reading | Lionel Messi To Get Paid In Crypto For Joining Paris Saint Germain

Recall that this recent growth trend in crypto market value occurs after Elon Musk, the CEO of Tesla, revealed debt to Bitcoin. Musk mentioned on July 22 that SpaceX, his aerospace firm, is indebted to Bitcoin. Furthermore, he announced Tesla’s plan to recommence its acceptance of crypto payments for purchases.

Musk explains that this decision was due to the remarkable drop in the percentage of fossil fuel used for Bitcoin mining. It alleged that the previous decision of the CEO in suspending BTC payment to his company was the main contributory factor to the May Bitcoin’s price crash.

Featured image from Pixabay, chart from TradingView.com