Stablecoins Dropped $7B in May as Traders Redeem Tokens in Massive Quantities


Tether, the most valuable stablecoin by market value, had its supply reduced by 11% as a result of redemptions, causing a 4 percent decline in May.

It has been a rough month for the top four stablecoins by market capitalization, which has together lost roughly $7 billion in supply this month.

Nearly $159 billion was in circulation at the beginning of May for stablecoins such as Tether, Circle’s USD Coin, Binance USD, and DAI.

In the wake of Terra’s demise, investors’ appetite for risk has shrunk to below $152 billion, a reduction of almost 4 percent.

On a monthly basis, MakerDAO’s overcollateralized stablecoin DAI has seen its supply shrink the most. According to CoinGecko, its market capitalization on May 1 was $8.5 billion. With a decrease of 26%, it is now a little over $6.2 billion.

The second-worst blow was dealt with USDT. The biggest stablecoin has lost 11% of its value in the last month, or $9 billion. The price of Bitcoin decreased by around 25 percent, while the price of ether plunged by over 30 percent.

Holders of USDT and USDC may convert their tokens for US dollars at a 1:1 ratio through Tether and Circle, respectively. Those tokens that were redeemed due to a lack of demand are burnt.

However, BUSD users are unable to utilise Binance to redeem their tokens. Payments in white-label stablecoins are handled by Paxos instead. There is less centralization with DAI, since the tokens may only be redeemed for collateral in an emergency.

Despite the market turbulence in May, USDC and BUSD both rose. With a market capitalization now hovering above $53 billion, USDC has seen a 7.5% increase in value. Despite losing more than $3 billion in market value in March and April, the company’s stock price has remained stable.

Since the beginning of the month, the value of Binance’s stablecoin has increased by 5.5 percent, taking its market cap from $17.7 billion to $18.6 billion at the time of this writing.

As Circle’s Joao Reginatto revealed to the audience at Blockworks’ Permissionless conference in Palm Beach on Wednesday, the stablecoin issuer has redeemed $7 billion USDC in the previous week, equivalent to 11% of Circle’s total redemptions going back to 2021.

Despite this, stablecoins’ entire market value has increased by 5.5 percent this year, adding about $8 billion.

The value of USDC tokens has increased by 20%, with $10.6 billion more in circulation. The BUSD rose by 22%, or $4.2 billion, over the previous quarter. USDT’s losses were $4.1 billion, a 5% drop, while DAI’s dropped 30%, from $8.9 billion to $6.2 billion, a drop of 30%.

Also Read: A two-year high was reached for the number of Ethereum addresses in a loss

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