BUSD ‘s market share has been declining for months and the decline shows no signs of slowing down.
Even Binance appears to have dropped support for its dollar-pegged stablecoin, once a dominant force on the cryptocurrency exchange.
BUSD loses market share
In the past month, the market capitalization of BUSD has fallen 16.14%, DeFiLlama data shows.
Along with other well-known stablecoins, BUSD is losing dominance to USDT. According to Blockworks, on Sunday, August 6, the flagship Tether stablecoin accounted for a 67.17% share of the total market.
When Binance first launched BUSD in 2019, it put its full weight behind the stablecoin. Backed by the world’s largest crypto exchange, it took BUSD just 261 days to amass a $1 billion market capitalization. And it achieved this milestone faster than any other stablecoin.
Within a year, the exchange had listed 97 BUSD trading pairs. At its height, that number rose to more than 300.
But last year, Binance was forced to put a brake on BUSD.
In February, stablecoin issuer Paxos ended its partnership with Binance and stopped minting BUSD at the request of the New York Department of Financial Services (NYDFS).
In a June tweet, Binance CEO Changpeng Zhao (CZ) claimed that the NYDFS had essentially limited the potential supply of BUSD to $23 billion, a fact he associated with the growth of rival USDT.
Has Binance given up on BUSD?
Amid declining market share and Tether’s growing dominance, Binance has turned the tide on BUSD a bit.
After the platform removed eight BUSD spot trading pairs on Wednesday, August 2, there are now only 289 pairs available to BUSD users. By contrast, Binance lists 352 USDT trading pairs.
Against the backdrop of declining support from its main platform, data from IntoTheBlock shows that the circulating supply of BUSD has decreased by almost 81% in the last year alone.
Additionally, recent Binance Launchpool events have favored alt stablecoins as staked assets. While BUSD participation was once a staple of the exchange‘s token farming platform, it has been absent from recent pools.
Instead, the latest Launchpool events have adopted the new stablecoin FDUSD. While Launchpools run throughout August, participants can earn CYBER and SEI by staking BNB, TUSD, or FDUSD.
The rivalry between Tether and Binance intensifies
While recent Binance Launchpools have abandoned staking BUSD, the platform has not turned around and accepted defeat at the hands of Tether, even though it has enabled USDT staking in previous rounds.
Additionally, during an AMA in May, CZ criticized the world’s largest stablecoin for its lack of transparency, calling USDT a “black box.”
In Tether’s corner, on the other hand, CTO Paolo Ardoino recently launched digs at FDUSD after it gained significant traction in early August.
In May, First Digital’s debut of FDUSD received a significant boost from Binance, which celebrated its listing by offering zero trading fees for select FDUSD trading pairs.
USDT reserves in the spotlight
CZ is not the first to object to Tether’s collateralization strategy, which critics argue is opaque.
Against such accusations, Tether has moved to improve transparency on its USDT reserves, which mainly consist of US Treasury bills and other dollar-based liquid assets.
However, for the naysayers, 85% of USDT reserves made up of cash and cash equivalents are not the problem. It is the other 15% that they oppose.
For Tether, a key victory against such complaints came this week, when a judge threw out a class action lawsuit that claimed it misled investors.
The complaint underscores one of the most common criticisms of USDT. Namely, Tether’s claim that his stablecoin can be redeemed one-for-one with fiat dollars is misleading.
However, now that the case has been dismissed, Tether’s strategy of putting 15% of USDT reserves into alternative investments has been legitimized in court.
Tether’s Bitcoin Balance Increases by $176 Million
In addition to corporate bonds, precious metals, and collateralized loans, Tether has also invested in Bitcoin. And in May, the company stated its intention to put 15% of its profits into cryptocurrency.
3/ The Wallet Holdings of bc1qjas matches the quarterly holdings of Tether
The BTC balance of this address increases every quarter as well
– As of 30 Mar: 53.49k BTC
– As of 30 Jun: 55.02 BTC pic.twitter.com/NSLLPcu77u
— Tom Wan (@tomwanhh) August 4, 2023
Since then, Tether’s Bitcoin holdings have skyrocketed. According to blockchain analyst Tom Whan, the company now owns 55,000 BTC, worth $1.6 billion. This represents an increase of $176 million from the previous quarter.
In fact, a BTC address identified by Whan as belonging to Tether is the 11th best-funded in existence and contains around 0.3% of all BTC in circulation.