USDT And USDC Stablecoins See Significant Rise Following BUSD Crash

The recent regulatory scrutiny of the stablecoin market has given rise to USDT’s dominance, with Circle’s USD Coin (USDC) recording more than $700 million in market valuation. However, the recent development comes after Paxos Trust announced that it had halted mining BUSD stablecoins following the US Securities and Exchange Commission (SEC) claims that the coins are unregistered securities.

Amid Regulatory Concerns

Since the start of the year, the stablecoin market has come under increased regulatory scrutiny, with Tether’s USDT witnessing massive growth amid a crackdown from the SEC. Last week, the New York-based Paxos Trust Company, the issuer of the BUSD stablecoins, reportedly stopped minting the Binance-based asset after regulators in the United States labeled the token as a security.

Unsurprisingly, the move led to many investors questioning the future of stablecoins considering the involvement of the SEC in the ongoing case with Paxos Trust. Meanwhile, USDT, the stablecoin market’s undoubted leader, has seen an uptrend in its market capitalization by adding a whopping $1.9 billion to push its value to $70.3 billion.

USDC, the second-largest stablecoin, recorded an addition of over $700 million to reach $42 billion. While BUSD, in light of the ongoing regulatory scrutiny, saw its market cap shrink to $12.9 billion from $16.1 billion, with market shares tumbling to 9.4% from 12.1%.

However, the effect of BUSD’s ongoing regulatory standoff has been minimal on the broader crypto market. Even as uncertainties over the regulator’s action still hover in the industry, the market appears to have adjusted to the earlier shocks.

An Arcane Research analyst, Vetle Lunde, believes that the outcome of the SEC-Paxos court ruling will not result in any major shift in the market at this period. However, Lunde noted that any enforcement against USDC or USDT would have far-reaching implications for the broader stablecoin market.

Increased Trade Volumes On Exchanges

The Binance stablecoin is said to have triggered a significant rise in trading volumes on major crypto exchanges in recent weeks. As revealed by Kaiko, the crypto data analytic platform, on the first day of February, Binance’s Bitcoin liquidity reduced by more than 30%, while the US-based Coinbase saw a nearly 15% increase.

Furthermore, stablecoins have continued to be the driving force behind the expansion of the crypto ecosystem, providing users access to various crypto assets. Over the past few years, stablecoins have been in the spotlight as lawmakers and institutional players seek their adoption amid skepticism from central banks.

While most people associate crypto assets like Bitcoin and Ethereum with volatility, stablecoins have the opposite impression in the minds of critics. They are not subject to the volatility of the crypto market.

Meanwhile, BUSD’s debacle with the US regulator may see USDT dominating the stablecoin market again after its spectacular fall last year.