Erik Weijers, 3 months ago
The world's largest crypto exchange, Binance, announced that it will convert stablecoin USDC into its own stablecoin, BUSD. Users will still be able to deposit and withdraw USDC. While the news seems negative for USDC, experts say it doesn't have to: on the contrary.
What will Binance do, exactly? Anyone with a balance in USDC will see it automatically converted to Binance USD (BUSD) on September 29. First, of course, this makes little or no difference to the value of the holdings. After all, these are stablecoins, which are pegged to the dollar if all goes well. The price of one stablecoin relative to another fluctuates a fraction of a percent on an average trading day (barring exceptional market conditions: during the market panic of June 2022, USDT dropped several percent relative to other stablecoins).
Without stablecoins, the crypto market would be in a lot worse shape. Stablecoins grease the crypto exchanges' machinery. Thanks to stablecoins, users who want to for example sell their Ethereum, can store the dollar value on crypto exchanges, in the form of stablecoins. So they don't have to move their dollar capital back and forth between the exchange and a traditional bank account, which is costly and impractical.
USDC is the second largest stablecoin after market leader UDST (Tether). Binance's own stablecoin, BUSD, follows at a respectable distance in terms of total market value: over 50 billion of USDC are in circulation and 19 billion of BUSD.
While at first glance the news seems bad for USDC and the stablecoin market, it doesn't have to be. Fragmenting the market into all kinds of different stablecoins is not convenient for users: it requires hundreds of trading pairs. For example, the less traded crypto coins do not have a trading pair in USDC but they do have BUSD. In that case, in order to buy that coin, the user must first convert his USDC into BUSD. And that costs transaction fees.
This conversion from USDC to BUSD is what Binance will now do by default. The crypto market on Binance will therefore become more liquid: there will be less friction for traders whose starting point is USDC. Consider that most trading pairs between crypto and stablecoins on Binance are of course with their own stablecoin BUSD.
USDC need not suffer from this news. On second thought this is not about a ban but about making trading between USDC and other crypto frictionless. If the news is negative for a market player, it is likely to be market leader USDT. This will keep existing separately on Binance, but thus will become more of an island, and more of a hassle for traders.
Nov 10, 2022
In the last couple of days many misconceptions about stablecoins were discussed in the media. The FUD was juicy and the story was told that Tether (USDT) and Circle (USDC) had exposure to FTX and could face serious consequences. None of this is true and while FTX is imploding, stablecoins are not affected.
Nov 08, 2022
Solana is one of the fastest and most scalable blockchains and has a thriving DeFi ecosystem. Despite several hiccups and complete outages, this ecosystem is growing. It was last weekend during the Solana Breakpoint conference when Circle announced its new plans for Solana.
Oct 25, 2022
When summer started in earnest this year, the second biggest dollar stablecoin, USDC, started losing market share. It was a trend change from a years-long uptrend versus USDT. People were already preparing for 'the flippening': the moment where USDC would surpass the original stablecoin in market cap. What's going on?
Oct 21, 2022
Because we in Europe all have bank accounts and still a somewhat stable currency, we almost forget that there are entire continents where this is not the case. Latin America, for example. Chainalysis research shows that crypto transaction volume increased by 40% between mid-2021 and 2022.