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Stablecoin Volumes Spike as Traders Look for Safe Harbor Amidst Latest Downturn

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While the digital asset market has performed extremely well as a whole since calendars flipped to 2023, this past week has shown a few cracks in the ‘bull market' narrative.  This is highlighted by drops in top assets like Bitcoin and Ethereum to the tune of nearly 10% over 7-days.

Trepidation among traders is further underscored when looking at the trading volumes over this same time period where, of the top six assets by volume, 4 are stablecoins – which clearly points to traders finding safe harbor until the aforementioned cracks are filled.

However, even among these ‘safe' assets, not all have performed equally, with much of their own value being funnelled in to one project in particular.

1. Tether (USDT)

Perhaps no other coin has benefitted more than Tether (USDT) in the aftermath of various U.S. banks collapsing in weeks past.  With USDC unfortunately getting negatively caught up in the mix due to reserve assets held at Silicon Valley Bank, there has been a resulting mass exodus of capital from the project that has migrated towards none other than its top competitor – Tether (USDT).

USDT Marketcap: March 1-April 21

While the gap between these projects was once narrowing as companies like Coinbase and Circle pushed the narrative of USDC being the safer bet, the market cap of each has been widening further than it has been in a long time with USDT accounting for 2.5x that of USDCs.  This is a trend that has only continued over during the market downturn of the past few days.

7-Day Trading Volume: ~$34,333,594,650

2. USD Coin (USDC)

If looking for a visual on just how drastic the decline in USDC holders has been over the past month, just look at the following chart showing the projects marketcap since March 1st.

USDC Marketcap: March 1-April 21

To the credit of USD Coin, the project quickly regained its peg after bottoming out below $0.90 on March 11th.  Unfortunately though, the damage was done, with traders clearly having lost confidence in the project – despite Circle assuring USDC holders that it would cover any potential shortfall in the assets backings.

Memories tend to be short-term when involving digital assets though, and in time USDC may be able to begin narrowing the gap between itself and USDT as it once was.  Afterall, Tether has seen its fair share of controversies over the years and has always come back and thrived.  Why can't USD Coin do the same?

In the meantime, USDC has been able to stay true to its 1:1 peg with USD despite much of this assets trading volume being made up of holders seeking the perceived greener pastures of USDT.

7-Day Trading Volume: ~$5,478,175,600

3. Binance USD (BUSD)

While the recent decline in interest for USD Coin is mainly due to flaws highlighted by the collapse of various U.S. banks, Binance USD saw its problems begin when its issuer, Paxos, was ordered to stop minting the asset.

Occurring in the wake of a scrutiny by the NYDFS being levied against Paxos, which put forth charges alleging it had violated investor protection laws, the halt on minting has essentially relegated this asset to a slow and drawn out path to insignificance.

BUSD Marketcap: March 1-April 21

As can be seen above, BUSD has seen a steady exodus of asset holders in recent weeks.  Much like Tether has benefitted due to a similar exodus from USDC, it has also benefitted from the legal woes plaguing BUSD issuer, Paxos.

7-Day Trading Volume: ~$3,227,533,600

4. TrueUSD (TUSD)

When news broke that billions in USDC reserve assets were locked up in the collapse of SVB, stablecoin owners panicked and fled to rival assets.  With BUSD already floundering due to the legal woes of Paxos, this meant the remaining top assets were either Tether or TrueUSD.  While the former may have received the bulk of the attention in this mass-exodus, TrueUSD was able to nearly double its marketcap in a two day period.

TUSD Marketcap: March 1-April 21

Despite this short term surge in interest, TUSD has seen its marketcap remain relatively stagnant in the weeks since, even in the most recent downturn.

Partly fuelling its recent resilience and trading volume is the decision by Binance to halt fees on trades between TUSD and Bitcoin.  With Binance being the largest exchange of its kind in the world, this has unsurprisingly played out well for TUSD, as it has been able to remain a place of safe harbour during turbulent market activity.

7-Day Trading Volume: ~$1,651,707,800