Stablecoin Supplies See Largest Drop in History as Crypto Exodus Continues

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In Brief
  • Stablecoin supplies have shrunk by $8.4 billion over the past month.

  • USDT and DAI are down while USDC and BUSD have rebounded.

  • Crypto markets have declined a further 3.5% on the day.

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Aggregate supplies of stablecoins have declined by their largest ever amounts over the past month as the capital continues to flow out of crypto.

On May 19, on-chain analytics provider Glassnode reported that aggregate stablecoin supplies declined by a total of $8.4 billion in the last month. It added that this has been the largest decline in history.

The fallout from the Terra ecosystem collapse has impacted the rest of the stablecoin ecosystem as circulating supplies continue to contract.

All major stablecoins, centralized or otherwise, have seen supplies shrink this month, but two have managed to rebound from the rout.

Stablecoins: a shrinking pot

At their peak, the total market capitalization of all stablecoins combined was almost $200 billion. Today, that figure has fallen to $162.7 billion according to CoinGecko which also reports a daily trading volume of $63.8 billion.

In its weekly on-chain report, Glassnode referred to an “unstable coin contagion” depicting how the collapse of UST has brought down the rest of the stablecoins.

Tether briefly decoupled from the dollar last week but managed to regain composure. Its supply has declined almost 12% from a peak of $83.2 billion earlier this month to $73.4 billion according to the Tether transparency report.

With UST out of the picture, Binance USD is once again the third-largest stablecoin by market cap. Its supply is near its peak at just over $18 billion having rebounded from a drop to $16.5 billion on May 12.

Circle’s USDC is also back up in terms of supply as it is often viewed as a safer alternative due to it being fully regulated. According to the company, there are 52.3 billion USDC in circulation. Glassnode reported a dip to $48.4 billion just after the Terra collapse but it has managed to recover.

MakerDAO’s decentralized stablecoin, DAI has seen a supply decline by a whopping 24.4% as two billion DAI has been burned according to Glassnode. DAI supply contracts when debt holders close out their positions by repaying and burning the stablecoin. “This process can be discretionary, or forced in the event of a vault liquidation,” Glassnode added.

Crypto market cap drops again

The crypto market exodus has been driving stablecoin supplies lower as traders and investors cash out to fiat.

Markets are down a further 3.5% over the past 24 hours resulting in a total market cap fall to $1.3 trillion, its lowest level since a similar dip last July.

Things are at a crucial juncture now at this support level as the next one is $300 billion lower at $1 trillion in terms of total capitalization. Crypto markets have not been that low since Jan 2021, and analysts have warned that the bears may not be finished yet.

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Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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