The stablecoin of leading cryptocurrency exchange Binance, $BUSD, has seen its market capitalization plunge by $2 billion after reports of its past mismanagement surfaced, at a time in which Tether’s $USDT has been seeing its market share of the stablecoin space rise.
According to available data, BUSD’s circulating supply fell to $15.4 billion this week, down $2 billion over the past month. The decline comes after a previous decline seen in December when users started moving funds off of exchanges over fear of a collapse similar to that of FTX.
Notably, Binance has earlier this month acknowledged past problems in the management of the reserves used to back the stablecoin on the BNB Chain, which at times led to more than $1 billion being missing in collateral. A Binance spokesperson has said that the process of maintaining the backing has since been improved “with enhanced discrepancy checks to ensure it’s always backed 1-1.”
Data compiled by Jonathan Reiter, co-founder of blockchain analytics firm ChainArgos, suggests BUSD was often undercollateralized between 2020 and 2021. On three occasions, the gap surpassed $1 billion. Reid’s analysis suggests that when minting Binance-peg BUSD, on the BNB Chain, new tokens were minted without the equivalent BUSD issued by Paxos on Ethereum being locked up.
Meanwhile, CryptoCompare’s stablecoins report reveals that the top 10 stablecoins have remained unchanged in position, while Tether’s $USDT saw its market capitalization rise 0.82% to $66.7 billion in January, increasing its dominance in market share to 48.7%, the highest since October 2021.
The report notes that Centre Consortium’s $USDC, Binance’s $BUSD, and Gemini Dollar ($BUSD) all saw a decline over the past month. Meanwhile, the market capitalization of True USD ($TUSD) and TerraClassicUSD ($USTC) rose 24.5% and 13.1% respectively, with the former surpassing Pax Dollar $USDP in market capitalization.
Per CryptoCompare’s report, the market capitalization of stablecoins fell to $137 billion in January, the lowest it has been since September 2021. This marks the tenth consecutive month of decline. The trading volume of stablecoins has nevertheless exceeded in January that of December, increasing by 9.46% to $397 billion due to increased market volatility.
Featured image via Unsplash
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- Source: https://www.cryptoglobe.com/latest/2023/01/binances-busd-sees-market-cap-plunge-by-2-billion-as-tethers-market-share-rises/