In a startling revelation during Coinbase’s Q2 earnings call, CEO Brian Armstrong revealed that Binance, the world’s leading cryptocurrency exchange, has liquidated its entire holdings of the stablecoin USDC. This unexpected disclosure comes as a surprise, prompting a flurry of speculation and analysis about Binance’s motivations and the potential implications for the stablecoin market.
“USDC market cap is up after Binance pulled out,” Armstrong reportedly stuttered during Coinbase’s earnings call. “The unexpected answer seemed to imply that crypto exchange Binance was a holder of Circle and that USDC is safer now that Binance no longer holds the stablecoin,” the media outlet Protos writes in an exclusive report.
The news is raising eyebrows, given that Binance was a substantial holder of USDC, a stablecoin owned by a consortium that includes Coinbase. However, the situation becomes more complex when we consider the current state of USDC.
The stablecoins market cap has been shrinking rapidly in recent months, plummeting from $44.5 billion at the start of the year to a mere $26.06 billion at press time. This comes on the heels of the Federal Deposit Insurance Agency’s intervention to prevent a bank run on Circle’s main banks, a move that effectively saved USDC.
Crypto Community Puzzled By Coinbase CEO’s Revelation
The crypto community is abuzz with theories about Binance’s motivations for this drastic move. Tether (USDT) CTO Paolo Ardoino offered a cryptic clue via Twitter, hinting at market pressures and the emergence of new competitors.
“Isn’t it interesting that USDT is being pressured down… and USDC, the main competitor that you would expect being gaining from the situation, is redeemed heavily nevertheless, while suddenly a competitor born 2 days ago is getting it all?” Ardoino wrote, presumably referring to Binance’s new stablecoins TUSD and FDUSD.
The latter was introduced just 2 days ago on Binance with a zero-fee promotion. As Bitcoinist reported, there are rumors that Tron founder Justin Sun is behind the Hong Kong-based First Digital Group which is issuing the stablecoin. CZ and Sun reportedly have close ties.
Chase Coleman, Founder and Partner of Tiger Global Management, added fuel to the speculation fire, suggesting a strategic shift by Binance and its allies:
CZ + Sun have been exiting USDT via USDC to get USD. Tether can’t redeem billions. New stablecoins emerge. TUSD denominated volumes went from 0% to 20% in just a few months. Binance controls 90% of TUSD supply. This is very simple. The cartel is turning. Please advise.
TUSD And FDUSD Quickly Conquer Market Shares
Further insights come from a recent report by Kaiko, which highlights Binance’s strategic shift to zero-fee trading. The report revealed that Binance had expanded its zero-fee trading promotions to 13 BTC pairs about a year ago, but reversed this strategy due to the substantial cost. Despite this, Binance’s market share increased by 10% in 2022, hitting an all-time high of ~70% relative to its biggest competitors.
Today, Binance appears to be focusing on TUSD, a stablecoin it has adopted as a quasi-replacement for BUSD after Paxos was forced to halt issuance. BTC-TUSD, now Binance’s only bitcoin market that has both zero maker and taker fees, is the highest volume pair across all exchanges, with more than $10bn in volume every week.
According to blockchain analytic firm ChainArgos, $DUSD is also putting up big numbers in its first few weeks “out of the gate even if not involving very many unique wallet addresses or unique transactions.”
In conclusion, the full implications of Binance’s strategic shift are yet to be seen. As the dust settles on this bombshell revelation by Coinbase CEO Armstrong, all eyes will be on Binance and the broader stablecoin market to see how this high-stakes game of chess unfolds.
At press time, USDT showed a slight depeg, but nothing of concern.
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