Changes and Reflections on the Stablecoin Market After the USDC Crisis

Recently, the collapse of a partner bank has led to a liquidity crisis for USDC. Data shows that on March 11, the price of USDC fell to a low of 0.8788 USD, with a daily decline of over 12%. This de-pegging has also affected other stablecoins that use USDC as collateral, such as DAI and FRAX, which have also experienced varying degrees of de-pegging.

Although the crisis of USDC was alleviated on March 13, this incident has brought many changes and reflections to the stablecoin market as one of the once most trusted stablecoins. Does it create opportunities for other types of stablecoins? Has the liquidity of market stablecoins changed? Where did the stablecoins mainly flow during the crisis? By analyzing the basic situation and market data of stablecoins (March 11-18), we found:

1. The average market value of fiat stablecoins has risen across the board, while the average market value of crypto-asset-based stablecoins has fallen across the board. This indicates that market confidence in fiat stablecoins remains relatively strong, while crypto-asset-based stablecoins are facing greater negative impacts.

2. Currently, the market capitalization of USDC is about 47% of USDT, less than half. The market capitalization of TUSD has increased by over 54%, the highest growth rate. The market capitalizations of stablecoins such as USDT, DAI, LUSD, USDP, and GUSD have also increased.

3. On March 18, the exchange's stablecoin supply was approximately USD 21.461 billion, a decrease of 11.02% compared to the 11th, indicating a rapid outflow.

4. The total locked value of 13 major stablecoins in Uniswap v3, Curve, and AAVE v2 decreased from 3.464 billion USD on the 11th to 3.297 billion USD on the 18th, a decline of approximately 4.83%.

5. On March 11, the total trading volume of stablecoin trading pairs in the DEX reached 23.17 billion USD, far exceeding the average daily volume of around 1 billion USD at the beginning of this month. The trading between these three stablecoins, USDC, USDT, and DAI, constitutes the main liquidity path for stablecoins in DeFi under the crisis, reflecting users' confidence in fiat stablecoins.

TUSD Market Value Soars, USDC Crisis Affects Other Stablecoins Differently

The de-pegging of USDC has led to significant fluctuations in its own market value as well as that of other stablecoins. Comparing the market value changes from the 10th to the 11th, major stablecoins showed a trend of more declines than increases. The market value of USDC decreased by 2.5%, while SUSD, DOLA, MAI, and USTC were affected even more, with declines ranging from 2.8% to 5.0%. In contrast, the market values of 9 other stablecoins increased, with USDP seeing the largest increase of over 11%.

The market value changes on the 18th compared to the 11th mostly continued the previous trend. The market values of the four stablecoins, USDT, TUSD, DAI, and LUSD, continued to rise, with TUSD having the highest increase of over 54%, and USDT also rising by more than 6%. The market values of the seven stablecoins, including USDC, BUSD, MIM, and SUSD, continued to decline, with MIM experiencing the highest drop of over 17%, and USDC also falling by more than 14%.

From the perspective of the average market value changes of different types of stablecoins, the crisis of USDC did not lead to a collective collapse of fiat stablecoins. On the contrary, the average market value of six fiat stablecoins showed an upward trend in both time periods, with average increases of 1.83% and 2.41%, respectively. This indicates that confidence in fiat stablecoins remains relatively strong in the market.

However, the crisis of USDC has had a lasting negative impact on crypto-asset-based stablecoins, especially those collateralized by USDC. The average market capitalization of the 9 crypto-asset-based stablecoins has decreased in both periods, with average declines of 0.74% and 1.42%, respectively.

It is noteworthy that algorithmic stablecoins demonstrated a certain level of resilience during this crisis. Although the average market capitalization of four algorithmic stablecoins fell by 1.26% from the 10th to the 11th, the average market capitalization rose by 2.82% from the 11th to the 18th, marking the highest average increase during the same period.

USDC market capitalization is less than half of USDT, fiat stablecoins are still mainstream

Currently, there are over 100 types of stablecoins in the market, with a total market value of approximately 133.388 billion USD. As of March 18, USDT remains the "leader" among stablecoins, with a market value of about 76.74 billion USD. Following it is USDC, with a market value of approximately 36.03 billion USD. Together, they account for a total market value of 112.764 billion USD, which is about 85% of the total market value of stablecoins. After this crisis, the current market value of USDC is approximately 47% of that of USDT, which is less than half.

In addition to USDT and USDC, the stablecoins with a market capitalization exceeding $1 billion are BUSD, DAI, TUSD, and FRAX, which account for 6.22%, 4.08%, 1.53%, and 0.78% of the total market capitalization of stablecoins, respectively. Stablecoins with a market capitalization exceeding $100 million include USDP, USDD, GUSD, LUSD, USTC, MIM, and SUSD, while other stablecoins have a market capitalization between $48 million and $88 million.

In terms of stablecoin types, these main stablecoins can be divided into four categories: fiat stablecoins, crypto asset-backed stablecoins, algorithmic stablecoins, and hybrid stablecoins. Currently, fiat stablecoins have the highest market capitalization, but among the high market cap stablecoins, the number of crypto asset collateralized stablecoins is the largest, with a total of 9 types.

It is worth noting that, in addition to Ethereum still being the main chain for multiple major stablecoins, there are also large market cap stablecoins on other public chains. For example, due to transaction fees, Tron has surpassed Ethereum to become the main chain for USDT, and it is also the main chain for TUSD, USDD, and USDJ. In addition, there are also large market cap stablecoins on Optimism, Polygon, and Kava. The emergence of stablecoins as liquidity mediums on different public chains has positive significance for the DeFi development of each public chain.

The supply of stablecoins in exchanges has decreased, and purchasing power has declined.

On March 18, the exchange's stablecoin supply was approximately $21.461 billion, a decrease of 11.02% from $24.120 billion on March 11, the day USDC depegged, indicating a rapid outflow. However, on the 11th, the exchange's stablecoin supply increased by 3.49% compared to the 10th, which is $814 million, possibly related to users exchanging stablecoins on the exchange for hedging purposes.

The current stablecoin crisis has also affected the purchasing power of stablecoins. The Stablecoin Supply Ratio (SSR) is a common metric for measuring the potential purchasing power of the market, referring to the ratio of BTC's market capitalization to the total market capitalization of all stablecoins. A lower SSR indicates a more sufficient supply of stablecoins, stronger potential buying pressure, and a higher likelihood of price increase.

As of March 18, the SSR is about 4, near the upper band of the Bollinger Bands (200, 2), and has increased by about 30% from 3.08 on the 11th, showing a significant recent rise. This is related to the recent rebound in BTC prices. In a situation where asset prices quickly rise in the short term, the overall market value of stablecoins has declined due to the decoupling crisis, leading to a slight increase in SSR and a decrease in actual purchasing power. This brings more uncertainty to the market's return to a bull market.

DEX stablecoin trading volume surges, lending and deposit rates decline

During the crisis, not only did a large amount of stablecoin flow out of exchanges, but the total locked amount of stablecoins in the three DeFi protocols closely related to stablecoin trading (Uniswapv3, Curve, and AAVE v2) also decreased, although the extent was relatively small. The total locked amount of 13 major stablecoins in these three DeFi platforms decreased from 3.464 billion USD on the 11th to 3.297 billion USD on the 18th, a decrease of about 4.83%.

It is noteworthy that the locked amount of USDT in these three DeFi protocols has increased significantly, with the highest increase of over 94% in Uniswapv3, while the lowest increase is nearly 40% in Curve. In contrast, the locked amount of USDC has decreased in both Uniswapv3 and Curve, and the decline is not small.

In addition, the locked amounts of FRAX, TUSD, SUSD, LUSD, MIM, USDD, and MAI have all decreased across these three protocols, with the locked amounts of FRAX and TUSD in AAVE v2 decreasing by more than 70%. In contrast, the locked amounts of fiat stablecoins BUSD and GUSD have increased.

On March 11, the total trading volume of stablecoin trading pairs on DEX reached $23.17 billion, far exceeding the average daily volume of around $1 billion at the beginning of the month. On the same day, the total trading volume of stablecoin trading pairs with other tokens also reached $7.99 billion, creating a small peak.

After the USDC depegging, trading between stablecoins has become extremely active. On the 11th, the trading volume of USDC stablecoin pairs reached 10.43 billion USD, USDT reached 8.51 billion USD, and DAI was about 3.71 billion USD. The trading among these three stablecoins has formed the main liquidity path for stablecoins in DeFi during the crisis.

The de-pegging of USDC has also had a significant impact on the lending and borrowing rates in the lending market. The borrowing rates of USDC and DAI typically show a "V" shape, meaning that the changes in borrowing demand are comparable to or smaller than the changes in deposit scale, but the fluctuations are relatively small. In contrast, the borrowing rates of USDT, TUSD, GUSD, LUSD, and SUSD generally show a "Λ" shape, indicating that during a crisis, the change in borrowing demand is greater than the change in deposit scale, resulting in relatively insufficient liquidity. Currently, the lending and borrowing rates in the lending market have all returned to the levels seen at the beginning of the month.

Stablecoins are the primary bridge between the crypto world and fiat currency, and the "components" that are more closely linked to the real world, such as regulated USD stablecoins, are more likely to become vulnerabilities in the system. However, because of this, their ability to resist risks is stronger than that of purely crypto-based upper-layer assets, as centralized management can control risks more effectively. This is why users maintain confidence in regulated fiat stablecoins and why stablecoins are receiving increasing attention from regulatory authorities.