Analysis of Stablecoin Market Changes After USDC Depegging Event

Recently, the USD stablecoin USDC is facing a liquidity crisis due to the collapse of its partner bank. Data shows that on March 11, the price of USDC once fell to 0.8788 USD, a daily decline of over 12%. This decoupling event not only affected USDC itself but also impacted other stablecoins that use USDC as collateral, such as DAI and FRAX.

Although the USDC crisis was resolved on March 13, as one of the once most trusted stablecoins, this de-pegging event has brought about many changes and reflections in the stablecoin market. By analyzing the basic situation of stablecoins and the market data from March 11 to 18, we have identified the following key points:

1. The market value of fiat stablecoins has generally risen, while the market value of stablecoins backed by crypto assets has seen a comprehensive decline. This indicates that the market still has strong confidence in fiat stablecoins, but stablecoins backed by crypto assets are facing greater negative impacts.

2. The current market value of USDC is about 47% of USDT, which is less than half of the latter. TUSD's market value has increased by over 54%, the largest increase. The market values of stablecoins such as USDT, DAI, LUSD, USDP, GUSD, FLEXUSD, and USDD have also increased.

3. As of March 18, the exchange's stablecoin inventory was approximately 21.461 billion USD, a decrease of 11.02% compared to the 11th, showing a rapid outflow trend.

4. The total locked value of 13 major stablecoins in three DeFi protocols, Uniswap v3, Curve, and AAVE v2, decreased from 3.464 billion USD on the 11th to 3.297 billion USD on the 18th, a decline of approximately 4.83%.

5. On March 11, the total trading volume of stablecoin trading pairs on decentralized exchanges reached $23.17 billion, far exceeding the average daily volume of around $1 billion at the beginning of the month. The trading among the three stablecoins USDC, USDT, and DAI constituted the main liquidity pathway for stablecoins in DeFi during the crisis, reflecting users' confidence in fiat stablecoins.

The market value of TUSD surges, the USDC crisis affects other stablecoins differently

The decoupling of USDC has led to significant fluctuations in its own and other stablecoin market values. Data from March 11 compared to March 10 shows that major stablecoins fell more than they rose. The market value of USDC decreased by 2.5%, while the market value of SUSD, DOLA, MAI, and USTC fell between 2.8%-5.0%. The market values of ALUSD, BUSD, FRAX, MIM, USDJ, and FPI also decreased, but the extent was smaller. Additionally, 9 stablecoins saw their market values increase, with USDP experiencing the largest rise, over 11%. DAI, FLEXUSD, LUSD, and TUSD had increases between 1.0%-3.5%.

By March 18, the market value trend of most stablecoins continued the trend of the past 11 days. The market values of the four stablecoins USDT, TUSD, DAI, and LUSD continued to rise, with TUSD seeing the highest increase of over 54%, and USDT also rising by more than 6%. The market values of the seven stablecoins USDC, BUSD, MIM, SUSD, DOLA, USDX, and ALUSD continued to decline, with MIM experiencing the largest drop of over 17%, and USDC dropping by more than 14%. Some stablecoins such as USDP, GUSD, FLEXUSD, and USDD shifted from rising to falling after the crisis.

From the perspective of the average market value changes of different types of stablecoins, the USDC crisis did not lead to a collective collapse of fiat stablecoins. Whether comparing the market value changes from the 10th to the 11th or from the 11th to the 18th, the average market value of the six fiat stablecoins showed an upward trend, with average increases of 1.83% and 2.41%, respectively. This indicates that market confidence in fiat stablecoins remains relatively strong.

However, the ongoing USDC crisis continues to have a negative impact on crypto-asset-backed stablecoins, especially those stablecoins that include USDC as collateral. During the two periods mentioned above, the average market cap of 9 crypto-asset-backed stablecoins showed a downward trend, with average declines of 0.74% and 1.42%, respectively.

It is worth noting that algorithmic stablecoins have shown a certain degree of resilience during this crisis. Although the average market capitalization of the four algorithmic stablecoins decreased by 1.26% from the 10th to the 11th, experiencing the largest decline. However, from the 11th to the 18th, the average market capitalization increased by 2.82%, marking the largest increase.

USDC market cap drops to below half of USDT, fiat stablecoins still dominate

According to the data, there are currently over 100 types of stablecoins in the market, with a total market capitalization of approximately 133.388 billion USD. As of March 18, USDT remains the leader in the stablecoin market, with a market capitalization of around 76.74 billion USD. USDC ranks second, with a market capitalization of about 36.03 billion USD. Together, their total market capitalization is 112.764 billion USD, accounting for 85% of the total market capitalization of stablecoins. After this crisis, the current market capitalization of USDC is about 47% of USDT, which is less than half.

In addition to USDT and USDC, stablecoins with a market capitalization of over $1 billion also include BUSD, DAI, TUSD, and FRAX, which respectively account for 6.22%, 4.08%, 1.53%, and 0.78% of the total market capitalization of stablecoins. Stablecoins with a market capitalization of over $100 million include USDP, USDD, GUSD, LUSD, USTC, MIM, and SUSD, while other stablecoins have a market capitalization ranging from $48 million to $88 million.

In terms of stablecoin types, the main stablecoins can be divided into four categories: fiat stablecoins, crypto-asset backed stablecoins, algorithmic stablecoins, and hybrid stablecoins that combine crypto-asset collateral and algorithms. Currently, fiat stablecoins have the highest market capitalization, but the most numerous among high market cap stablecoins are crypto-asset backed stablecoins, totaling 9 types. It is worth noting that crypto-asset backed stablecoins often accept fiat stablecoins as collateral, indicating a certain correlation between these two types of stablecoins.

Another new trend is that, in addition to Ethereum remaining the main chain for various major stablecoins including USDC, DAI, and FRAX, other public chains have also seen the emergence of large market cap stablecoins. For example, influenced by transaction fees, Tron has surpassed Ethereum to become the main chain for USDT, and is also the main chain for TUSD, USDD, and USDJ. Additionally, public chains like Optimism, Polygon, and Kava also host large market cap stablecoins. The widespread presence of stablecoins as liquidity mediums across different public chains has positive implications for the DeFi development of these chains.

The supply of stablecoins on exchanges has decreased, and purchasing power has fallen to a short-term low.

Blockchain analysis company Chainalysis pointed out that during periods of market volatility, outflows of funds from centralized exchanges often surge, as users are concerned about the potential collapse of the exchange leading to the inability to access their funds. CryptoQuant's monitoring data on the stablecoin inventory of exchanges corroborated this viewpoint.

Statistics show that on March 18, the exchange's stablecoin supply was approximately $21.461 billion, down 11.02% from $24.120 billion on March 11, the day USDC was depegged, indicating a rapid outflow trend. Interestingly, the exchange's stablecoin supply increased by 3.49% on the 11th compared to the 10th, adding $814 million. This may be related to users exchanging stablecoins on the exchange for hedging purposes on the 11th.

The current stablecoin crisis has also affected the purchasing power of stablecoins. The Stablecoin Supply Ratio (SSR) is a commonly used metric for measuring the market's potential purchasing power, indicating the ratio of BTC's market capitalization relative to the total market capitalization of all stablecoins. A lower SSR means that the supply of stablecoins is more sufficient, indicating stronger potential purchasing pressure, which may lead to price increases.

As of March 18, the SSR is about 4, close to the upper Bollinger Band (200, 2), and has risen about 30% from 3.08 on the 11th, showing a significant recent increase. This is related to the recent rebound in BTC prices. In the case of a rapid short-term rise in asset prices, the market capitalization of stablecoins has actually declined due to the de-pegging crisis, leading to a slight increase in SSR and a decrease in actual purchasing power. This brings more uncertainty to the market's return to a bull market.

DEX stablecoin trading volume surges, deposit and loan interest rates fall back to early month levels

During the crisis, not only did a large amount of stablecoins flow out of exchanges, but the amount of stablecoins locked in DeFi protocols closely related to stablecoin trading, such as Uniswapv3, Curve, and AAVE v2, also saw a decline, although the extent was relatively small. Data shows that the total amount of 13 major stablecoins locked in these 3 DeFi protocols decreased from $3.464 billion on the 11th to $3.297 billion on the 18th, a decline of about 4.83%.

It is worth noting that during the period from March 11 to 18, the locked amount of USDT in these three DeFi protocols saw a significant increase, rising over 94% in Uniswapv3 and nearly 40% in Curve. In contrast, the locked amount of USDC decreased in both Uniswapv3 and Curve, with a considerable drop.

In addition, the locked amounts of FRAX, TUSD, SUSD, LUSD, MIM, USDD, and MAI have fallen across these three protocols, with FRAX and TUSD experiencing a drop of over 70% in locked amounts on AAVE v2. In contrast, the locked amounts of fiat stablecoins BUSD and GUSD are on the rise.

The types of stablecoin trading pairs in DEX can more accurately capture the recent flow of stablecoins in DeFi. On March 11, the total trading volume of stablecoin trading pairs in DEX reached USD 23.17 billion, far exceeding the average daily scale of around USD 1 billion at the beginning of the month. At the same time, the total trading volume of stablecoin trading pairs with other tokens also reached USD 7.99 billion that day, creating a small peak.

Overall, after USDC decoupled, trading among stablecoins became extremely active. Further observation of the trading volumes of major stablecoin trading pairs reveals that on the 11th, the trading volume of USDC trading pairs reached USD 10.43 billion, USDT reached USD 8.51 billion, and DAI was approximately USD 3.71 billion. The trading among these three stablecoins likely constituted the main liquidity path for stablecoins in DeFi during the crisis.

This is consistent with Chainalysis' earlier view that the surge in USDC purchases on DEX is due to confidence in fiat stablecoins, with some users buying USDC when it was relatively cheap, betting that it would re-peg to the dollar.

The depegging of USDC has also had a significant impact on the borrowing and lending rates in the lending market. The borrowing and lending rates of USDC and DAI have shown a "V" shape trend, meaning that the changes in borrowing demand are comparable to or smaller than the changes in deposit scale, but the fluctuations are relatively small. In contrast, the borrowing and lending rates of USDT, TUSD, GUSD, LUSD, and SUSD have shown an "Λ" shape trend, indicating that during a crisis, the changes in borrowing demand are greater than the changes in deposit scale, leading to relative liquidity shortages. Currently, the borrowing and lending rates in the lending market have all returned to the levels seen at the beginning of the month.

Stablecoins serve as the primary bridge between the crypto world and fiat currencies, and the "components" that are more closely connected to the real world, such as regulated USD stablecoins, are more likely to become vulnerabilities in the system. However, precisely because of this, their resistance to risks.