According to data analytics firm Coinmetrics, the overall stablecoin supply saw the sharpest drop in history in the second quarter of 2022.
Lucas Nuzzi, head of research and development at CoinMetrics, shared a chart showing the total stablecoin supply since January 2020.
The second quarter of 2022 saw the total supply decline for the first time in stablecoin history. Even excluding the UST, more than 10 billion was redeemed *directly from the treasury of major issuers*.
The list included DAI, USDT, OMNI and TRX, SAI, USDK, PAX. Circle’s USDC and Binance’s BUSD were compiled in a separate chart. Terra’s original UST variant is not included in the chart.
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
— Lucas Nuzzi (@LucasNuzzi) June 15, 2022
Nuzzi wiped out 7 billion from the total supply of USDT in April and May. Compared to all central stablecoin issuers, the most redemptions were seen in Tether. He added that this may have been caused by the moves of a few people rather than any major market.
“The sharpness of this decline indicates that a single transaction or small group is behind it,” he said.
During the fiasco in the Terra ecosystem in May, including LUNA and the UST stablecoin, Tether was also diverged from the US dollar by about 5 percent. As a result, around 7 billion USDT was used as major players wanted to exit the market and avoid further potential declines.
Another hugely successful project was MakerDAO DAI, which lost 40 percent of its supply as a result of “the largest liquidation in its history.”
USDC and BUSD are also evaluated on a separate chart, with a sharp drop of about 5 billion in supply in May. But both have since rebounded and are close to returning to their all-time high of around 65 billion.
The unique market conditions in 2022 offer a possible explanation for why stablecoin users have taken risks over the past few weeks.
So far, the crypto industry has seen the Terra ecosystem collapse worth nearly $40 billion, while lending platform Celsius and venture capital firm Three Arrows Capital have also suffered partial liquidations. Companies struggling to avoid bankruptcy due to Terra face declining asset prices and potentially unsustainable business models.
Tether, which has been working with Celsius for a $10 million equity investment in 2020 and a $1 billion loan to the company last year, said on Monday that it has not been affected by the falling price of the Celsius native token and the firm’s liquidity woes.
The Firm stated that its loan activity with Celsius has been “always over-collateralized.”