Total supply of stablecoins dropped sharply for first time ever in Q2

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According to data analytics firm Coinmetrics, the total supply of stablecoins saw the sharpest decline in history during the second quarter of 2022 as a result of “concerns about short-term liquidity and insolvency that were not present during the 2020 panic”.

Lucas Nuzzi, head of research and development at CoinMetrics, highlighted the data via Twitter on June 16, with a graph showing the total supply of stablecoins since January 2020.

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“22Q2 is the first time in the history of stablecoins where aggregate supply has decreased. Even if we exclude UST, more than 10B has been redeemed *directly from treasuries* of major issuers.”

The list includes DAI, UDST, OMNI and TRON, SAI, USDK, PAX. While Circle’s USDC and Binance’s BUSD were compiled in a separate graph. The original version of Terra’s UST was not included in the graph.

Nuzzi said that Tether saw the most redemptions of all centralized stablecoin issuers, with 7 billion of the total USDT supply being wiped out across the board in April and May, and is likely due to the actions of a few rather than any significant market- wide movement.

“The sharpness of that reduction suggests that a single unit, or small group, was behind it,” he said.

The impact of the Terra ecosystem, including its native LUNA token and the UST stablecoin, in May coincided with Tether’s USDT de-pegging from the US dollar to around 5%. As a result, around 7 billion USDT was cashed out as the big players were looking to exit the market and avoid any potential carnage.

Another project taking a big hit was MakerDAO’s DAI, which saw 40% of its supply retire as a result of the “largest liquidation event in its history”.

USDC and BUSD were also included in a separate graph, and May also shows a sharp drop in supply of around 5 billion, however, both have rebounded and hit their respective all-time highs of around 65 billion. Close to coming back. and 48 billion a pop.

related: Fears of DeFi transition and rumors of Celsius and 3AC bankruptcy could weigh on NEXO’s price

The unique market conditions of 2022 provide a possible explanation as to why stablecoin users have been taking risk off the table over the past few weeks.

So far, the crypto sector has seen the Terra eco-system crash nearly $40 billion, while lending platform Celsius and venture capital firm Three Arrows Capital also reported liquidations, escaping bankruptcy due to the risk of Terra. are fighting for. Falling asset prices and a potentially unstable business model.

Tether, which has been exposed to Celsius through a $10 million equity investment in 2020 and a $1 billion loan given to the company last year, issued a statement on Monday, saying the falling price of the Celsius native token and the firm liquidity problem. no effect” on its reserves.

The firm said its lending activity with Celsius has “always been more collateral”.