Only one cryptoasset in the top 100 is in the green one month after the Terra ecosystem catastrophe. Stablecoins based on algorithms, such as Magic Internet Money (MIM) and Frax, are likewise much smaller. MIM’s total supply has reduced by 87%, while Frax’s has shrunk by 43%, leaving $3.6 billion between the two protocols.
- Terra’s UST’s fate hasn’t deterred traders from experimenting with TRON-powered algorithmic stablecoin USDD
- Bitcoin dominance has risen 15% to almost half of the entire crypto market
It’s been a month since Terra’s algorithmic stablecoin UST de-pegged from the US dollar. At the time, Terra’s native token LUNA and UST were the ninth and 10th largest cryptocurrencies by market capitalization — together valued at $42 billion. Both tokens have since evaporated almost entirely, begetting a major market shakeup.
Although Bitcoin’s dominance is growing and most cryptoassets are declining, one exchange token has defied the trend. While algorithmic stablecoins aren’t entirely gone, UST’s bankruptcy has drastically altered the stablecoin market.
Tether (USDT) is the most valuable stablecoin ($72.5 billion vs. $53.9 billion for USD Coin), but the last month saw its biggest substantial dollar-denominated drop in its seven-year history. After big money traders flocked to redeem their tokens during May’s market volatility, USDT’s supply has dropped 13% in the last month, or approximately $11 billion.
“The drop in USDT since the UST collapse is a reflection of the relative market confidence in its issuer Tether (based in the British Virgin Islands) compared to that of USDC (issued by the US-based Centre Consortium, founded by Circle and Coinbase),” Genesis Trading wrote in its May report.Stablecoins based on algorithms, such as Magic Internet Money (MIM) and Frax, are likewise much smaller. MIM’s total supply has reduced by 87%, while Frax’s has shrunk by 43%, leaving $3.6 billion between the two protocols.
MakerDAO’s DAI, while not strictly algorithmic, has given up 18% of its supply since UST de-pegged — even though it is overcollateralized on-chain by more than half. In fact, Circle’s USDC and Binance’s BUSD (issued by Paxos) are the only top 12 stablecoins not to lose market share following UST’s demise.
Market participants clearly prefer asset-backed cryptocurrency, but not Tether (USDT). The circulating supply of the USDC has increased by $5.4 billion, or 11%. BUSD increased by $555 million, or 3%.
However, it appears that some people still believe in algorithmic stablecoins. TRON’s Decentralized USD (USDD), which was created just days before UST collapsed, has garnered $491 million in the last month, representing a 230 percent increase in supply.
USDD holders have been able to lock their tokens inside lending platform JustLend for double-digit yield all month, a prospect which has been a boon to TRX’s price. USDD’s market value is now $703 million, ranking it the 10th biggest stablecoin behind Waves’ Neutrino USD and ahead of Paxos’ gold-backed asset PAXG.According to Genesis: “The jury is out on whether the UST collapse will turn out to be proof that algorithmic stablecoins are a flawed concept, or whether different design choices could be successful in the future.”
“The event has highlighted the importance of understanding nuances in this space and that not all stablecoins are created equal.”
Still, the collective supply of the top 12 stablecoins at the time of UST’s de-pegging — not counting UST itself — is down by $9 billion.
Bitfinex’s LEO most resilient cryptoasset
According to Blockworks’ analysis of price data, Bitfinex’s Unus Sud Leo (LEO) token was the best performing top 100 token by market value (excluding stablecoins and wrapped tokens) – the only token to gain half a percent in value over the month.
With LEO’s private token sale in May 2019, Bitfinex raised $1 billion in USDT in ten days. The plan was to restore $850 million in funds lost when police raided the exchange’s troubled third-party payment processor, Crypto Capital Corp.
Bitfinex repurchases and burns LEO to compensate investors who participated to the transaction, and ordinary Bitfinex customers who have LEO in their accounts receive fee reductions. The corporation promised to burn all one billion LEO tokens eventually, and it has already burned about 6.5 percent of the supply.
Crypto exchange tokens outperformed much of the market in May. Many have burn mechanisms similar to LEO’s as a way to reward holders. KuCoin’s native token KCS has been the third-best top 100 crypto asset post-Terra, falling only 3.5%. But FTX’s FTT and Binance’s BNB weren’t so hot — both tanked 20%.
LEO’s price doubled earlier this year when US authorities revealed they seized $3.5 billion in bitcoin stolen from the exchange back in 2016. Bitfinex has said it will commit at least 80% of the recovered net funds to repurchase and burn LEO tokens within 18 months of the date of recovery.
A Bitfinex spokesperson told Blockworks LEO’s performance should be viewed as a measure of its customers’ confidence and trust in the platform.
“We have also begun to see what may be a correlation between the performance of LEO, and the prospects of Bitfinex receiving the stolen bitcoin that was seized by the US authorities earlier this year,” they said.
TRX (down 3.5 percent) and monero (down 3.5 percent) are two more top-100 tokens doing well in Terra’s wake (down 9 percent ). Bitcoin was ranked fifth, having dropped 14% from roughly $35,500 to $30,400. BTC is now range bound and without any discernible movement.
Ether, on the other hand, has dropped 30% in the last month, which is about typical for the top 100 coins. Bitcoin has gained nearly 15% market share to now account for nearly half of the digital asset market, while ether has lost nearly 9% market share to just under 18%.
On Wednesday, the second largest cryptoasset by market cap took an important step toward its planned Merge, as the Ethereum Ropsten testnet successfully transitioned to proof-of-stake.In terms of losses, aside from LUNA, the native digital asset for Terra-powered lending protocol Anchor took the biggest blow, falling 91%. Convex Finance’s tokens and the privacy blockchain Secret Network’s tokens both plunged 66% and 62%, respectively, while StepN’s move-to-earn project fell 60%.
Decentralized finance governance tokens Oasis and Avalanche were both drained by 55 percent. Yearn has lost 54% of its value, while ApeCoin, a metaverse initiative, and layer-11 assets NEAR, MINA, and solana have all had their prices drop.
While crypto markets plummeted in the months leading up to UST’s de-pegging, all digital assets have lost 20% of their value since the stablecoin’s de-pegging, totaling $336.6 billion.
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