2023-08-09 13:33:42
Since last week, a new stablecoin war is starting to unfold in the crypto market. As things stand, the main players are Binance, Tether, USDC and Justin Sun. Although the connections are not yet clear and require further analysis, cryptoanalysts have already begun to unravel the battle for the supremacy of stablecoins. Tether (USDT) Breaks Off for 8th Day (USDT) has been slightly broken from the dollar peg for eight days. While previously the slight deviation compared to the US dollar was quickly offset by market makers, this time the situation is different. And the reasons are mysterious. According to a report by analyst firm Kaiko, “it is not clear why traders are backing out of USDT, as there was no clear reason.” According to Paolo Ardoino, Tether’s CTO, the sales may be due to “irregular play” by competitors, which may be related to the July 26 launch of Binance’s new stablecoin, FDUSD. Notably, despite promotional efforts, FDUSD trading volume on Binance has so far fallen short of expectations. Kaiko notes, “The weak market response to FDUSD fee-free pairs is surprising given that these types of promotions tend to have a strong impact on overall trading activity”. This reluctance to trade FDUSD is puzzling, especially compared to the success of other stablecoins such as TrueUSD. In summary, Kaiko states that something is wrong: “FDUSD conspiracy or not, it’s clear that the stablecoin war is back under the rug. Even though Tether is not a paragon of transparency, traders have historically turned a blind eye to it, which means that the recent selloff is truly mysterious.” A War Between Binance and Tether? Adam Cochran, a well-known crypto analyst, wrote on Monday: “Despite banks in Asia and Europe being open and US banks opening for trading soon, the USDT fixation is the furthest from the USD rate since the FTX collapse”. He also observed selling pressure from Binance-funded trading accounts and the possible involvement of Binance CEO CZ in supporting new stablecoins. Meanwhile, Tether’s CTO Ardoino and Binance’s CEO Changpeng Zhao had a serious exchange of blows on Twitter. Ardoino stated that the unusual transactions were an “attack” on Tether by its partners. CZ subsequently tweeted that Tether is a “black box” and is therefore replacing it with its own stablecoins such as TUSD and FDUSD. This was evaluated by Cochran: “Even if this is an attack by CZ to strengthen their new stablecoin. […] This is the least confidence we have seen from market makers regarding the USDT peg in a long time. […] Hopefully this will end up being just a CZ vs Paolo fight – but it’s worth keeping an eye on.” USDT vs. USDC Meanwhile, Jeremy Allaire, CEO and founder of USDC issuer Circle, emphasized USDC’s transparency and liquidity. He tweeted: “USDC liquidity. In the past month we have issued 5 billion USDC and redeemed 6.6 billion USDC… We do not charge for minting and burning USDC”. Allaire was likely targeting Tether, which has a bad reputation for proof of reserves. Travis Kling, founder of Ikigai Fund, responded to Allaire with a graph showing that USDT’s market share has been increasing since March, while USDC has been losing market share. He asked, “I agree Jeremy. Transparency really matters. As a result, what do you think, why does this graph look like this?”. Cochran responded by speculating that a possible strategy for Tether is to sell its stablecoin at a loss, withdraw the USD from USDC, and reissue it as USDT to attack its competitor. So it suggests that Tether can take advantage of a relatively low cost (10 basis points) to sell at a loss and then withdraw USD from USDC to reissue as USDT. By placing the underlying assets in money market funds, Tether could potentially achieve a return of 500 basis points/year. This tactic, as Cochran points out, is not just a simple financial move, but a serious strategic attack on competitors. The analyst also highlights the changing dynamics of Tether’s primary trading markets. With FTX, Binance and Binance.US once being the main backers of USDT, now the landscape is changing. Two of these funds are no longer in play, and Binance is transitioning to new stablecoins like FDUSD and TUSD. Cochran believes that Binance, realizing the profitability of issuing stablecoins, may push Tether into the DAI DSR and promote their new stablecoins. The Justin Sun relationship The intrigue is further enhanced by Justin Sun’s actions. Rumors have long suggested close ties between CZ and Sun. Sun’s recent financial maneuvers, including major divestments from Huobi Global to Binance, followed by a $200 million USDT deposit into Huobi, have piqued the interest of many. Cochran’s investigations suggest that Sun may be using a new tactic to show confidence in Huobi amid rumors of insolvency, fueling the stablecoin war: “[…] So it looks like he withdrew money from Huobi’s hot wallet, used it, and then deposited through his escrow address to show trust… […]. The good old Alameda trick.” The unfolding events therefore indicate that a high-stakes chess game is taking place on the board of stablecoins. With Tether’s transparency issues, Binance’s new stablecoins, and Justin Sun’s rumored involvement, it looks like the stablecoin war has begun. Although all the connections are far from clear, it seems that the fight in the background has already begun.
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#spotlight #Tether #Binance #Justin #Sun #USDC