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The total supply of stablecoins saw its sharpest drop in history during Q2 2022, with stablecoin redemptions spiking as a result of\u00a0\u201cshort-term liquidity and concerns about insolvency that were not present during the panic of 2020,” according to\u00a0data analytics firm Coinmetrics.<\/p>\n
CoinMetrics head of research and development Lucas Nuzzi highlighted the data via Twitter on June 16, with a graph showing the total supply of stablecoins since January 2020. <\/p>\n
\u201c22Q2 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.\u201d<\/p><\/blockquote>\n
The list included DAI,<\/a> USDT<\/a>, OMNI and TRON,<\/a> SAI, USDK, PAX. While Circle\u2019s USDC<\/a> and Binance\u2019s BUSD were compiled in a separate graph. Terra\u2019s original variant of UST was not included in the graph. <\/p>\n
\n22Q2 is the first time in the history of stablecoins where Total Supply decreased. <\/p>\n
Even if we exclude UST, over 10B has been redeemed *directly from the treasuries* of major issuers<\/p>\n
Some @coinmetrics<\/a> data pic.twitter.com\/AcCKx4Qp4z<\/a><\/p>\n
\u2014 Lucas Nuzzi (@LucasNuzzi) June 15, 2022<\/a><\/p><\/blockquote>\n
Nuzzi noted that Tether<\/a> saw the most redemptions of all centralized stablecoin issuers, with 7 billion of the total USDT supply wiped off the board in April and May, and is likely to have been caused by actions of a few, rather than any significant market-wide movements. <\/p>\n
\u201cThe sharpness of that decrease suggests that a single entity, or small cohort, was behind it,\u201d he said. <\/p>\n
The implosion of the Terra eco-system including its native LUNA token and UST stablecoin in May coincided with Tether\u2019s USDT de-pegging from the U.S. dollar by around 5%. As a result, around 7 billion USDT was redeemed as big players looked to exit the market and avoid any further potential carnage. <\/p>\n
Another project to take a big hit was MakerDAO\u2019s DAI, which saw 40% of its supply retired as a result of the \u201clargest liquidation event of its history.\u201d <\/p>\n
USDC and BUSD were also included in a separate graph, and also show a sharp drop in supply of around 5 billion in May, however, both have since rebounded and are close to being back to their respective all-time high levels of around 65 billion and 48 billion a pop. <\/p>\n
Related: <\/em><\/strong>DeFi contagion fears and rumors of Celsius and 3AC insolvency could weigh on NEXO price<\/em><\/strong><\/a><\/p>\n
The unique market conditions of 2022 offer a likely explanation as to why stablecoin users have been taking risk off the table over the past few weeks. <\/p>\n
So far, the crypto sector has seen the Terra eco-system cause a crash worth around $40 billion, while lending platform Celsius and venture capital firm Three Arrows Capital have also been fighting to avoid insolvency<\/a> due in part to reported liquidations, exposure to Terra, declining asset prices and potentially unsustainable business models<\/a>. <\/p>\n
Tether, which is also exposed to Celsius via $10 million equity investment in 2020 and a $1 billion loan it gave to the company last year, issued a statement on Monday<\/a> noting that the plummeting price of Celsius native token and the firm\u2019s liquidity troubles will have \u201cno impact\u201d on its reserves. <\/p>\n
The firm stated that its lending activity with Celsius has \u201calways been overcollateralized.\u201d<\/p>\n<\/div>\n