Stablecoin trading volume spikes as crypto investors take cover from falling market 

The data reveals that there has been a spike in stablecoin activity in the past 48 hours as the cryptocurrency market cap fell from $2 trillion to as high as $1.55 trillion, as investors try to mitigate losses from the market sell-off.

On Friday, the leading crypto asset Bitcoin dropped below the $40,000 support area to trade as low as $34349.25 and lost nearly $5,250 in one day, which is a 12.83% drop. Over the course of the year, bitcoin has fallen by nearly 25%, indicating the beginning of a bear market for cryptocurrencies.

The situation was even worse as Altcoins lost more than 30% in value, from $1.35 trillion at the beginning of the year, to currently stand at $919 billion, and have lost nearly $431 billion in market capitalization. This has effectively caused the altcoin market to lose its trillion dollar stature as they have all suffered double losses, so far, for the year.

What you should know

  • Data from Nomics reveals a significant increase in USDT from Tether, the most capped stablecoin pegged to the US Dollar, and daily trading volume. Between Thursday and the day of the crash, Friday, there was a 68.74% increase in USDT trading volume, from $68.45 billion to $115.50 billion. On Saturday, USDT trading volume showed no signs of abating as it recorded a daily volume of $109.21 billion.
  • We’re seeing the same rise in Circle’s USDC and BUSD, the second and third most capitalized stablecoins. The US dollar (USDC) saw a 126.13% increase between Thursday and Friday, from $3.98 billion to $9 billion, while the US dollar saw an 86.18% increase in daily trading volume from $3.40 billion to $6.33 billion.
  • The trio posted a combined transaction volume of $130.83 billion on Friday, higher than Bitcoin, which recorded $59.48 billion in daily transaction volume, and Ether, which recorded $43.69 billion in transaction volume on the same day. Even when Bitcoin and Ether’s trading volume is combined, it still falls short of the trio’s daily transaction volume indicating that traders are taking safety in the stablecoins during this bear market.
  • Data from Glassnode reveals that BUSD’s outflow reached a one-month high of $7.2 million. The exchange flow from USDC also reached a 7-month high of $9.72 million. The supply of USDT in smart contracts reached a 4-year high of 22.961%. All this points to a trip by investors to stable currency assets, as an attempt to stem the losses seen in the market.

The last time we saw steady activity for a stablecoin was between 5y and 7y In January 2022, when Bitcoin lost nearly $7,000 from $47,000 to trade as low as $40,600 during this period. Investors are reminded that cryptocurrencies are a speculative asset and are advised to trade with caution.

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