$1 Billion of USDT Is Sitting on Binance, and That’s Big for Crypto
Over the past few months, Tether’s USDT stablecoin has become increasingly important to the crypto market; the asset’s market capitalization has swelled as it has surged in adoption, now amounting for much of Ethereum’s network traffic.
Due to the growth, tracking the movement of USDT has given investors novel signals as to potential market trends. One such signal has seemingly appeared, with data indicating that leading crypto exchange Binance now holds a large sum of the stablecoin.
According to data shared by Jason Choi — a Wharton School graduate that is the Head of Research at crypto hedge fund The Spartan Group — there is now just shy of $1 billion worth of Tether “sitting on the sidelines on Binance alone.” This doesn’t count the other stablecoins that platform supports, including Binance USD, USD Coin, Paxos Dollar, and more.
Per the chart, this metric is up 1,000% from the mere ~$100 million worth of USDT on Binance at the $10,500 top in mid-February. A majority of the growth took place after the “Black Thursday” crash in the price of Bitcoin and other crypto-assets.
While a relatively odd metric to keep track of, the exponential growth in the amount of USDT stablecoin sitting on Binance signals one thing: there is likely a rapidly growing level of latent demand for cryptocurrencies.
Considering that the growth of Binance’s USDT was relatively steady, not marked by large spikes indicative of a direct deposit by Tether, it would suggest individual investors are sending their stablecoin onto the exchange en-masse.
The reason: they’re likely waiting to unload their USDT for cryptocurrencies, be that Bitcoin, Ethereum, or otherwise.
Importantly, it isn’t only USDT that has seen rampant growth: the past few weeks have seen a broad resurgence in the total value of stablecoins in existence, with Nic Carter from CoinMetrics indicating that the total value of these assets has been on a steep rally.
“Stablecoins collectively tacked on over $2b in March 2020 – by far their best month ever. Nontether stablecoins grew by $500m.”
As it stands, the value of all stablecoins has passed $8 billion, or approximately 4.2% of the entire public crypto market:
The sentiment goes that the market will reach a point where these investors will want to dump their stablecoin holdings for Bitcoin, causing a rapid rally higher in the crypto market.
Su Zhu, CIO and CEO and hedge fund Three Arrows Capital, summed up this sentiment well when he made the following apt comment in early-2019, a time when there was a mere $2 billion worth of value locked up in stablecoins:
“Theres an estimated $2B in cash sitting at crypto funds/holdcos. Theres another $2B+ sitting in stablecoins, and another $2B sitting at exchanges/silvergate/signature. […] Imagine thinking we need new money to hit $10k.”
Theres an estimated $2B in cash sitting at crypto funds/holdcos. Theres another $2B+ sitting in stablecoins, and another $2B sitting at exchanges/silvergate/signature.
This is $6B fiat already onboarded to crypto to buy your bags. Imagine thinking we need new money to hit $10k.
— Su Zhu (@zhusu) February 18, 2019
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HZ8KNA | HVB MINI FUTURE BULL ON DAX
DeFi market dips as crypto industry negatively reacts to COVID-19
As the novel coronavirus pandemic spreads across the world, the DeFi market dips responding to the impacts of the epidemic on the global economy. The entire amount of Ethereum (ETH) under decentralized finance applications is plummeting as the virus ravages the world.
Per DeFi Pulse, a decentralized finance data aggregator, the total market cap of ETH under such financial tools is now at its lowest point in the year. This indication tips off bearish scenes in both the industry and for Ethereum. A closer focus into the actual cause of the downfall, the recent shortcomings by MakerDAO and the implications caused by COVID-19 stands out above the rest.
The year 2020 started very brightly for the digital currency industry as well as the decentralized finance market. The total value locked (TVL) across the entirety of all DeFi apps in the sector reached an all-time peak of $ 1.239 billion back on Feb.15. DeFi firms MakerDAO, Synthetix, and Compound, lead the pack.
Nevertheless, during the colossal mid-March “Black-Thursday” price fall, the TVL has dipped by almost 43% to the present level of $712 million. Moreover, the total volume of ETH stored increased, reaching an all-time peak of 3.235 million ETH on Feb.5. Unfortunately, the value of ETH stored on decentralized financial applications has since descended as a result of COVID-19 and the Shortcomings of Maker.
At the peak of Maker’s failings, which resulted in more than $8 million in Ethereum auctioned for zero cash, the Eth locked in DeFi platforms dropped by more than 46% to $558 million within a week. The ravages caused by the widespread coronavirus has seen consumer behavioral changes happen rapidly.
Over the past, about one month, more than 10 million Americans have filled jobless claim applications demonstrating the terrible effects of the virus. Furthermore, the “Great Lockdown” has led to the shut down of many small scale business ventures worldwide, which is the spine of the DeFi ecosystem, and thus, caused the DeFi market dips.
At times of such disasters, cash is the most widely preferred method of payment, which results in many investors liquidating their assets to navigate the tough times. The high liquidity nature of digital currencies across the globe makes it an ideal asset for the majority of investors to liquidate when in need.
Arnold is a crypto and blockchain enthusiast. A communications expert with interest in hard-hitting journalism, he is always on the hunt for the latest events in the cryptocurrency world. He is inspired by what Bill Gates said, “Bitcoin is a technological tour de force.”
Author: Arnold Kirimi