Stablecoins have lost $38 billion since May as yields plummet and projects collapse
An estimated $148.7 billion worth of stablecoins are still in circulation.
According to the latest data from DefiLlama, since early May, the overall stablecoin circulation has dropped by about $38 billion. $148.7 billion still in circulation, mostly Tether (USDT) ($68.2 billion), USD Coin ($46.7 billion), Binance USD ($21.4 billion), DAI ($6.33 billion), Frax stable coin ($1.33 billion). ).
Meanwhile, yields on stablecoin borrowing and lending on decentralized protocols (DeFi) such as Aave have dropped sharply. Back in May, the Annual Variable Rate (APR) for Binance USD, USD Coin, and DAI loans was around 3.5%. APR then dropped to around 1.5%. Meanwhile, while the protocol’s optimal level is around 80%, their utilization, or percentage of the total supply of stablecoins taken out as loans, has also dropped from around 30% to 40%.
Unlike fiat currency deposits, stablecoin deposits do not automatically accrue interest due to their decentralized structure. Instead, users must put their money at risk by either lending it out or staking it into DeFi protocols. The borrower manages the funds and pays interest to the lender in return. However, while recent interest rate hikes by the US Federal Reserve have made fiat interest rate accounts more competitive, borrowing costs have increased. As a substitute, this has reduced demand for stablecoin borrowing and lending.
The collapse of projects such as Terra USD, an algorithmic stablecoin, has also weakened confidence in the stablecoin sector. In fact, the USTC collapse in May accounted for nearly 50% of the $38 billion stablecoin circulation plunge since then. Another stablecoin, Acala USD (aUSD), lost its peg in August after his 3.022 billion aUSD was accidentally minted due to protocol abuse. The community has since voted to burn most of the ‘tainted’ aUSD, but a small fraction of the faulty funds. is still missing and was excluded from the protocol. Stablecoins also face an uncertain future on the legislative side, with a bill in the US House of Representatives proposing to ban algorithmic stablecoins for two years.
The community then voted to burn most of the “tainted” aUSD, but a small portion of the glitched funds were still missing and were dropped from the protocol. But facing an uncertain future, a bill in the US House of Representatives proposes to ban algorithmic stablecoins for two years.
Stablecoins have lost $38 billion since May as yields plummet and projects collapse
Source link Stablecoins have lost $38 billion since May as yields plummet and projects collapse
