The stablecoin market is currently undergoing a significant shift as major whales divest their holdings of Binance USD (BUSD) tokens amid a liquidity crisis. This trend has been prompted by the absence of new BUSD supply being introduced into circulation, combined with a sharp drop in circulating supply following Paxos‘ receipt of a Wells Notice from the Securities and Exchange Commission (SEC).
The market capitalization of BUSD took a hit as a result of the announcement that the US SEC had published the Wells Notice. Because of this, the total number of tokens in circulation has rapidly decreased, despite the fact that the number of tokens being redeemed has increased. Paxos has been forced by regulators to halt the issuance of new tokens, while at the same time, there has been an increased demand for redemptions of BUSD.
According to the most recent information provided by WhaleStats, the top 100 BNB whales have been steadily reducing their Binance USD holdings by selling off their cryptocurrency. Over the course of the last week, the average weekly withdrawal amount for the whales was greater than $2 million.
In the recent stablecoin crisis, the US regulatory authorities have taken swift action to restore confidence in the digital currency market. The crisis was triggered by the news that the USDC stablecoin, which is pegged to the US dollar, had a portion of its reserves held in Silicon Valley Bank. This news led to concerns about the stability of the USDC, and its value dropped below its peg, causing a ripple effect across the digital currency market.
Another stablecoin affected by the crisis was DAI, which is partly backed by USDC as well as other digital currencies. As a result of the crisis, the value of DAI also fell below its peg, causing further instability in the market.
However, the US regulatory authorities quickly stepped in to mitigate the effects of the crisis. They announced measures to safeguard all depositors at Silicon Valley Bank (SVB) and Signature Bank after their recent closures. These measures were designed to restore confidence in the stability of the US financial system and prevent a further decline in the value of stablecoins.
The regulators took swift action to ensure the full protection of depositors at Silicon Valley Bank after it was closed and placed under the control of the Federal Deposit Insurance Corporation (FDIC). The FDIC is a US government agency that provides insurance to depositors in case their bank fails.