The market capitalization of Binance’s stablecoin, $BUSD, has dropped by $2 billion following reports of past mismanagement, at a time when Tether’s $USDT has been increasing its market share of the stablecoin space.
According to available data, the circulating supply of BUSD fell to $15.4 billion this week, a $2 billion decrease over the previous month. The drop follows a previous drop in December, when users began withdrawing funds from exchanges in fear of a collapse similar to that of FTX.
Notably, Binance acknowledged earlier this month that there were previous issues with the management of the reserves used to back the stablecoin on the BNB Chain, which resulted in more than $1 billion in collateral being missing at times. According to a Binance representative, the process of maintaining the backing has been improved “with enhanced discrepancy checks to ensure it’s always backed 1-1.”
According to data collected by Jonathan Reiter, co-founder of blockchain analytics firm ChainArgos, BUSD was frequently undercollateralized between 2020 and 2021. On three occasions, the difference exceeded $1 billion. Reid’s analysis indicates that when minting Binance-peg BUSD on the BNB Chain, new tokens were minted without locking up the equivalent BUSD issued by Paxos on Ethereum.
Meanwhile, according to CryptoCompare’s stablecoins report, the top ten stablecoins have remained in place, while Tether’s $USDT saw its market capitalization rise 0.82% to $66.7 billion in January, increasing its market share to 48.7%, the highest since October 2021.
According to the report, the Centre Consortium’s $USDC, Binance’s $BUSD, and Gemini Dollar ($BUSD) all fell in value over the last month. Meanwhile, True USD ($TUSD) and TerraClassicUSD ($USTC) market capitalizations increased by 24.5% and 13.1%, respectively, with the former surpassing Pax Dollar $USDP in market capitalization.
According to CryptoCompare, the market capitalization of stablecoins fell to $137 billion in January, the lowest level since September 2021. This is the tenth month in a row of decline. Despite this, the trading volume of stablecoins in January surpassed that of December, increasing by 9.46% to $397 billion due to increased market volatility.