Sunday, December 10

Stablecoin trading volume spikes as crypto investors take cover from falling market

Data reveals that there has been a spike in stablecoin activity in the last 48 hours as the cryptocurrency market capitalization fell from its $2 trillion status to as low as $1.55 trillion, as investors try to mitigate the losses caused by the market sell-off.

On Friday, flagship cryptocurrency asset Bitcoin fell below its $40,000 support zone to trade as low as $34,349.25, losing approximately $5,250 in one day, representing a 12.83% decline. For the year, Bitcoin is down approximately 25%, signalling the start of a cryptocurrency bear market.

Altcoins have had it worse as they have lost over 30% in value, from $1.35 trillion at the beginning of the year, to currently stand at $919 billion, losing approximately $431 billion in market capitalization. This has effectively caused the altcoin market to lose its trillion-dollar status as they all post double figure losses, so far, for the year.

What you should know

  • Data from Nomics reveals a spike in Tether’s USDT, the most capitalized stablecoin pegged to the United States’ dollar, daily trading volume. Between Thursday and the day of the crash, Friday, there was a 68.74% uptick in USDT’s trading volume, from $68.45 billion to $115.50 billion. On Saturday, the USDT trading volume has not shown any signs of decline as it posted a daily volume of $109.21 billion.
  • We experience the same spike in Circle’s USDC and Binance’s BUSD, the second and third most capitalized stablecoins. USDC saw a 126.13% spike between Thursday and Friday, from $3.98 billion to $9 billion while BUSD saw an 86.18% spike in daily trading volume from $3.40 billion to $6.33 billion.
  • The trio posted a combine transaction volume of $130.83 billion on Friday, higher than the trading volume of Bitcoin, which posted $59.48 billion in daily transaction volume and Ether, which posted $43.69 billion in transaction volume on the same day. Even when Bitcoin and Ether’s trading volume is combined, they still do not measure up to the trio’s daily transaction volume which suggests that traders are taking safety in stablecoins during this bear market.
  • Data from Glassnode reveals that BUSD’s exchange outflow volume reached a 1-month high of $7.2 million. USDC’s exchange outflow also reached a 7-month high of $9.72 million. USDT’s supply in Smart Contracts hit a 4 year high of 22.961%. These all indicate a flight by investors to stablecoin assets, as an attempt to stem the losses seen in the market.

The last time we saw stablecoin activity this high was between the 5th and 7th of January 2022, when Bitcoin lost approximately $7,000 from $47,000 to trade as low as $40,600 during the period. Investors are reminded that cryptocurrencies are speculative assets and are advise to trade with caution.