Nearly $14 billion has evaporated from BUSD over the past 3.5 months. Today the stablecoin returned to levels it hasn’t seen in a long time. Where have these funds gone?
BUSD dives
March 3 was the day when, for the first time in a very long time, the capitalization of the stablecoin BUSD, which is behind Binance, fell below $10 billion. It was last seen here on June 27, 2021.
We can find confirmation of this information on on-chain data provided by the Looknode analytics platform.
Looking back, the day the BUSD recorded record levels was November 15, 2022. This was right after the collapse of the FTX exchange, and stablecoin’s market cap reached $23.361 billion. Since then, some of these coins have been completely removed from the market, most likely to pay out the profits made by investors.
The situation around the coin changed dramatically on February 12 of this year. That was when its issuer, Paxos, faced a lawsuit from the US Securities and Exchange Commission (SEC). The subject of the claims was an alleged violation of investor protection regulations, which was specifically affected by the trading of BUSD. The result was that stablecoin entered a second strong wave of capital outflows.
Where is the capital outflow from BUSD going?
The SEC set the dominoes in motion, as moments later the New York Financial Services District ordered Paxos, the company, to stop issuing new BUSD coins. All these news combined, contributed to the flight of capital from the negatively stimulus-exposed stablecoin. Nonetheless, this one still maintains the value of the U.S. dollar, which it represents. It is puzzling, however, where the capital from the BUSD is currently migrating to. Certainly, some of these funds are leaving the cryptocurrency market altogether, by converting the BUSD into fiat currencies. This is reflected in the total amount of stablecoins in circulation. Tether (USDT) is also gaining. He is the main beneficiary, as on the Binance exchange, where BUSD operations are a daily occurrence, USDT is the second best option.
Nevertheless, the trend seems to be losing strength over time. It turns out that another, slightly less well-known stablecoin – TUSD – is gaining. He too, being a Binance-backed option, is becoming easy to exchange.
Will BUSD tell us the truth about stablecoins?
It is officially known that the product BUSD is not issued by the Binance exchange, but only affiliated with it. Rapid declines in stablecoin’s capitalization may soon lead to a situation where it disappears from the market altogether. Such an event, in the face of audits that the market has repeatedly asked for, but which never took place, will answer the question of whether BUSD is fully secured. If it turns out not to be, crypto will face selling pressure. On the other hand, if it is, both Binance and Paxos will gain in the eyes of market participants, not only in terms of credibility, but also noting.
