The Total Supply Of Stablecoins Fell Dramatically For The First Time Ever In Q2 2022
According to data analytics firm Coinmetrics, the total supply of stablecoins dropped to its lowest point in history in Q2 2022, with stablecoin redemptions soaring as a result of “short-term liquidity and concerns about insolvency that were not present during the panic of 2020.”
Lucas Nuzzi, CoinMetrics’ head of research and development, shared the information on Twitter on June 16, along with a graph depicting the entire supply of stablecoins since January 2020.
“22Q2 is the first time in the history of stablecoins where Total Supply decreased. Even if we exclude UST, over 10B has been redeemed directly from the treasuries of major issuers,” he stated.
Tether had the greatest redemptions of any centralized stablecoin issuer, with 7 billion USDT wiped off the board in April and May, according to Nuzzi. This is likely due to the acts of a few, rather than any meaningful market-wide changes.
“The sharpness of that decrease suggests that a single entity, or small cohort, was behind it,” he said.
USDC and BUSD were also included in a separate graph, and both indicate a dramatic decline in supply of approximately 5 billion in May, but both have subsequently risen to near all-time high levels of around 65 billion and 48 billion, respectively.
The unique market circumstances of 2022 are a possible reason for why stablecoin users have been avoiding risks in recent weeks.
So far, the Terra ecosystem has caused a $40 billion crash in the crypto market, and lending platform Celsius and venture capital firm Three Arrows Capital have been fighting to stay afloat due to reported liquidations, Terra exposure, declining asset prices, and potentially unsustainable business models.
Tether, which has a $10 million equity investment in Celsius in 2020 and a $1 billion loan to the company last year, said in a statement on Monday that the falling price of Celsius’ native token and the company’s liquidity issues will have “no impact” on its reserves.
Celsius’s lending activity has “always been overcollateralized,” according to the firm.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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