05 Dec 2022
The weekly circulating supply of USDC drops by approximately 800 million, which raises suspicion
Following recent market conditions that have reduced confidence in centralized exchanges, cryptocurrency investors are in large numbers redeeming their stablecoin holdings for fiat.
The weekly supply of USD Coin (USDC) has dropped by about 800 million USDC.
Following recent market conditions that have reduced confidence in centralized exchanges, cryptocurrency investors are in large numbers redeeming their stablecoin holdings for fiat.
USDC might be experiencing similar problems.
Do we have cause for concern?
Over the seven days from November 25th to December 1st, a total of $3.2 billion USDC was issued, $4.1 billion USDC was redeemed, and the total amount of USDC in circulation dropped by about $800 million, from $43.8 billion to $43 billion.
After the news broke, one Twitter user called it “very sus activity from Coinbase and Circle,” requesting an investigation from the Securities and Exchange Commission (SEC) and Gary Gensler.
Around the middle of November, Circle disclosed in a regulatory filing that its performance would be significantly lower than expected because of the demise of FTX and the automatic conversion of USD Coins on Binance.
The papers show that Circle invested $10.6 million in FTX Group. The CEO of Circle, Jeremy Allaire, had previously tweeted about the company's tiny equity investment in the defunct exchange.
The company has been active but has yet to disclose the amount of money it has invested in other ventures. Circle Ventures has participated in several funding rounds in the past few months.
Three examples are Ottr Finance's $3.1 million pre-seed round, Slide's $12 million Series A round, and Aptos's $150 million Series D round.
Circle made an incorrect prediction for the year 2022
Circle disclosed the error in its 2022 forecast in its S-4 registration statement filed with the SEC.
Even though Circle could not pinpoint the precise role that Binance's automatic USDC-to-BUSD conversion played in the demise of the USDC's circulation, it did observe that the exchange's BUSD supply increased by roughly $3bn between August 17 and September 30.
According to the company, the automatic conversion of the exchange could be to blame for the $8.3 billion drop in USDC circulation between June 30 and September 30, 2022.
Furthermore, the additional $13.5bn in USDC issued as of June 30 was 36% lower than in 2021. It's unfortunate to see that the supply of stablecoins has decreased even further over the past week.
Stablecoins may be in flux due to investor activity
According to Circle, investors have been fleeing stablecoins and reinvesting their money in more traditional assets like US Treasury securities since the demise of FTX and the conversion of BUSD.
Meanwhile, USDC continues to be the protocol's primary reserve currency. At the time of writing, USDC had a market cap of $43bn, making it the second largest stablecoin by market cap.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.
