Stablecoins in the cryptocurrency market help provide US dollar-pegged tokens within the volatile industry. In bull markets, the market capitalization of stablecoins tends to decrease as investors flock to more volatile assets; and in bear markets, investors seek shelter in low-volatility stablecoins, thus increasing their market caps.<\/p>\n
On Jan. 26, the total market capitalization for stablecoins like Tether (usdt<\/a>), USD Coin (usdc<\/a>), Binance USD (USD<\/a>) and Dai (dai<\/a>) is over $131 billion. <\/p>\n Stablecoins are so crucial to the future of crypto that Moody’s, a well-respected analytics agency, is planning to develop a scoring system, which may help reduce the speculation and fear that some investors have with stablecoins. <\/p>\n Such fear amid a lack of stablecoin transparency has led one of the top stablecoins, BUSD, to see a major usage decline in recent weeks.<\/p>\n Let’s examine the factors affecting the BUSD stablecoin. <\/p>\n While the BUSD market cap witnessed a large bump on Sept. 30, 2022, those gains came from Binance’s decision to forcefully swap the exchange’s USDC holders<\/a> to its own stablecoin. Those gains have since evaporated. At the time, the automatic conversions took $3 billion off of USDC’s market cap.<\/p>\n BUSD’s market cap has continued to fall due to problems with the dollar-pegged tokens’ management<\/a> that first came to light in January 2023. While Binance pushed back on reports that the stablecoin was not fully backed, investor fears led to a major exodus.<\/p>\n According to blockchain analytics provider Nansen, the circulating supply of BUSD decreased to $15.4 billion on Jan. 25. The drop represents a decrease of $1 billion from the previous week and $2 billion compared with December 2022. <\/p>\n The most recent decline sped up BUSD’s market cap decrease from $22 billion when worried investors rushed<\/a> to withdraw money from Binance after it misrepresented the amount of digital assets in its collateral reserves by combining corporate holdings on reports.<\/p>\n When the price of Bitcoin (BTC<\/a>is on the rise<\/a>, like it has been recently, stablecoins typically see a decrease in inflow as investors sell for other assets. One way to measure demand for stablecoins is to look at exchange inflows.<\/p>\n According to analytics provider CryptoQuant:<\/p>\n \u201cHigher value indicates investors who deposited a lot at once are increasing recently. For stablecoins, value rise indicates buying pressure.\u201d<\/p><\/blockquote>\n This means negative numbers show a decrease in buying pressure. While all stablecoins are seeing lower demand or inflows, BUSD has witnessed nearly 3x more inflow. <\/p>\n The massive decrease in demand may continue as the markets continue to rise and questions around BUSD remain.<\/p>\n Stablecoins<\/a> see an uptick in demand when they are utilized in trading pairs with altcoins. The trading use case works on both centralized exchanges (CEX)<\/a> and decentralized exchanges (DEX)<\/a>, <\/p>\n A concerning statistic surrounding BUSD is the lack of stablecoin use outside of its parent exchange, Binance. While $13.8 billion in BUSD resides on Binance, the next closest tally is $32.6 million in BUSD on Crypto.com. While Crypto.com may be the second-largest exchange for BUSD, USDC is the largest stablecoin on the CEX, with $582 million, dwarfing BUSD’s numbers. <\/p>\n The lack of use cases following the major decrease in demand for BUSD does not bode well for its market cap if the trend sustains over a long period of time. Combining these two negatives with the recent move by SWIFT to ban dollar transfers<\/a> Lower than $100,000 on Binance suggests that the stablecoin could continue to face major headwinds. <\/p>\n <\/p>\n The views, thoughts and opinions expressed here are those of the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.\n<\/p>\n This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Stablecoins in the cryptocurrency market help provide US dollar-pegged tokens within the volatile industry. In bull markets, the market capitalization of stablecoins tends to decrease as investors flock to more volatile assets; and in bear markets, investors seek shelter in low-volatility stablecoins, thus increasing their market caps. On Jan. 26, the total market capitalization for […]<\/p>\n","protected":false},"author":2,"featured_media":86255,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[235,203,210,234,231,232,237,238,236,233],"class_list":["post-86254","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain","tag-bitcoin","tag-crypto-currency","tag-elon-musk","tag-ethereum","tag-hyperledger","tag-ibm","tag-mining","tag-nodes","tag-spacex","tag-tesla"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/86254","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=86254"}],"version-history":[{"count":1,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/86254\/revisions"}],"predecessor-version":[{"id":86256,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/86254\/revisions\/86256"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/86255"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=86254"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=86254"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=86254"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}BUSD’s market cap takes a major hit <\/h2>\n
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USD inflows struggle<\/h2>\n
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The majority of BUSD is on Binance<\/h2>\n
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