Home » Coin Metrics: The State of Stablecoins and Other On-Chain Derivatives After the FTX Collapse

Coin Metrics: The State of Stablecoins and Other On-Chain Derivatives After the FTX Collapse

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In the wake of the unexpected shock of FTX’s woes, crypto market participants continue to retool. As we’ve described in recent issues on the state of the network, the Alameda wallet’s on-chain footprint spans many crypto assets and blockchains. The result is a huge and spreading impact. One area that we believe is of particular interest is stablecoins.

Stablecoins are digital tokens issued on a public blockchain that track an underlying asset, currently overwhelmingly in US dollars. In the most popular fiat-backed model, issuers such as USD Coin’s Circle hold reserves of backing tokens that are redeemable for U.S. dollars.

Stablecoins came under intense scrutiny earlier this year following the vicious death spiral of the “algorithmic” stablecoin Terra USD, but it remains an important area of growth for the digital asset industry. how has the stablecoin ecosystem been sustained since the FTX collapse?
Adoption
A simple measure of adoption is the value of on-chain transfers. Using a relatively long 90-day moving average window, one can arrive at an all-time high of nearly $25 billion in daily value exchanged with stablecoins on the blockchain. About $20 billion of this comes from USDC (Ether) and Tether (Ether and Tron) transfers.

Also worth considering is the role that stablecoins play in allowing users to withdraw funds from exchanges to reduce counterparty risk. We can note that the number of addresses holding more than $10,000 denominated in various stablecoins has increased over the past few months; in particular, USDC has seen a significant increase since the beginning of November, from 76,000 to 86,000.

Also worth considering is the role that stablecoins play in allowing users to withdraw funds from exchanges to reduce counterparty risk. We can note that the number of addresses holding more than $10,000 denominated in various stablecoins has increased over the past few months; in particular, USDC has seen a significant increase since the beginning of November, from 76,000 to 86,000.

Free-float Supply and Redemptions
Coin Metrics calculates a free float supply metric that better captures the supply of liquidity in circulation that is not held by treasury or redemption accounts.

This is particularly important in the case of analyzing Tether, whose redemption model includes a treasury address that holds redeemed USDT. These USDTs should not be considered part of the liquid supply, so it is important to look at the free float supply in order to accurately assess supply trends. Since November 8, USDT supply (Ether, Tron, Omni) has decreased by about $4 billion, from $67 billion to $63 billion.

The redemptions come at a time when Tether’s price is slightly below the $1 peg. This has created arbitrage opportunities for certain larger market participants: they can buy USDT below $1 and redeem it at par. However, the pace of redemptions was not as intense as this spring, reflecting a less severe discount to the $1 peg.

Meanwhile, the free-float supply of USDC, another fiat-backed stablecoin stalwart, has risen slightly since Nov. 8, from $37 billion to $40 billion.

Summary

As markets and participants alike look to learn and recover from recent events, we must pay close attention to the financial infrastructure that underpins many of the most popular uses of cryptocurrencies. Additionally, there is a wealth of information we can gather by focusing on stablecoins as market participants work to reduce their risk exposure and protect their assets.

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