Following Binance’s decision to put its product first and the allure of rising interest rates in traditional finance, the competitive environment for some of the cryptocurrency’s most popular tokens is changing.
Traders frequently use stablecoins as a haven from the wildly fluctuating price swings in the cryptocurrency markets. Stablecoins are digital tokens that aim to maintain a one-to-one value with a less volatile asset like the dollar. They’re also a well-liked tool for trading on various platforms or exchanges, and especially on decentralized platforms, they occasionally provide investors with a respectable yield.
Binance last month disrupted a long-established status quo between the market’s top three stablecoins by market value, announcing that it would automatically convert all deposits of Circle’s USDC, the second largest of the group, into its own, the third-largest BUSD stablecoin.
The transition, which appeared to be in the works for several months before going live for users on September 29, has upended USDC’s months of growth. According to CoinGecko data, its value has dropped by more than 12% since the beginning of September to below $50 billion, while Binance’s BUSD has steadily increased over the same period. Meanwhile, Tether’s USDT, the largest stablecoin by market capitalization at $68 billion, has plateaued after losing roughly a fifth of its overall circulation in May, when it briefly de-pegged during the Terra ecosystem’s collapse.
“Tether is still in a very strong position in the market,” said Clara Medalie, head of research at blockchain data firm Kaiko. “Not every exchange lists BUSD, and most traders will probably have accounts on multiple exchanges, so they’re going to favor a stablecoin that’s the easiest to work with.”
Concerns about anti-competitiveness arose following the announcement of Binance’s auto-conversion policy, as users may be less likely to convert their BUSD back into USDC when withdrawing from Binance if the stablecoins are considered to be of equal monetary value. Binance CEO Changpeng Zhao stated that the change was made to increase liquidity on the platform, which may make BUSD more useful to traders.
Image Credit: Shutterstock
Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.
