Approximately 7 billion Tether (USDT) redeemed as stablecoin supply decreases

Following the cryptocurrency market turmoil, the total supply of stablecoins has fallen quite significantly. This reportedly marks Q2 of 2022 as the first time in crypto history where the overall supply of stablecoins has decreased. 

Over the past month, the total supply of all stablecoins combined declined by more than 10 billion (equally +$10 billion), even when excluding the failed TerraUSD. According to Coinmetrics, the tokens were directly redeemed by the holders through the treasuries of major issuers. 

22Q2 is the first time in the history of stablecoins where Total Supply decreased.

Even if we exclude UST, over 10B has been redeemed *directly from the treasuries* of major issuers

Some @coinmetrics data pic.twitter.com/AcCKx4Qp4z

— Lucas Nuzzi (@LucasNuzzi) June 15, 2022

Tether records massive USDT redemption

The largest stablecoin issuer Tether Inc. recorded the most redemption of all centralized stablecoins, as USDT supply dropped by approximately seven billion on Ethereum, Omni Layer Protocol, and Tron Network. The decentralized stablecoin DAI dropped by over 40%, mostly due to liquidations of debt positions.

As of May 18, only about $8 billion in stablecoins were redeemed from the treasuries, and about 24% of DAI supply was contracted due to liquidations. 

Aggregate stablecoin supplies have declined by a total of $8.4B over the last month, the largest in history.

This reflects a net capital outflow from the space.

Last week, $USDC expanded by $2.64B, whilst $DAI contracted by over 24%, as debt positions were closed or liquidated. pic.twitter.com/xMrUy4gxkU

— glassnode (@glassnode) May 18, 2022

The sharpness of that [USDT] decrease suggests that a single entity, or small cohort, was behind it. […] Direct treasury redemptions are very unusual and speak volumes. There is a thirst for short-term liquidity and concerns about insolvency that were not present during the panic of 2020.

Lucas Nuzzi, Coinmetrics Head of R&D.

The development signals that crypto investors are losing confidence in stable assets or fear insolvency of the stablecoins due to the extending crashes in the cryptocurrency market. Part of the reason could be the collapse of TerraUSD, which impacted investors’ trust in stablecoins, especially those backed by algorithms. 

Stablecoins market cap shrinks

At the time of writing, the market capitalization of stablecoins was $157 billion, and over $95 billion in trading volume, per Coingecko.

Tether (USDT) sees over 46% dominance in the stablecoin category with a $71.5 billion market cap. USD Coin (USDC) follows the list with $54.8 billion, Binance USD (BUSD) with $17.4 billion, and DAI with $6.3 billion.