Stablecoins Survive Stress-Test Amid Extreme Volatility

The stablecoin market endured high degrees of volatility over the weekend as the crypto market crashed. Only two of the top 20 stablecoins by market capitalization lost their peg for more than an hour, and both of them rebounded back by 1:00 am EST Monday.

Ondo’s US Dollar Yield Token, USDY fell by as much as 4.7%, from $1.05 to $1.00, and took a little over an hour to reclaim its target price. USDB also faced a 5% depeg on Sunday night. The Blast-native stablecoin, backed by Maker’s DAI, fell as low as $0.95 and took 2 hours to reclaim its peg of $1.00.

crvUSD, FDUSD, and USDD all suffered brief depegs as well, however these tokens suffered losses of 2.5%-3% and recovered within 20 minutes.

August 3 and 4 recorded the highest weekend stablecoin transfer volume since June 9, combining for $107 billion, a 60% increase from the previous weekend’s $67 billion.

Rising Market Cap

The total stablecoin market capitalization now sits at $164.4 billion, up 26% from the beginning of the year, with Tether’s USDT commanding nearly 70% of the total stablecoin market share.

On July 28, stablecoins accounted for roughly 6.5% of crypto’s total market capitalization, but reached as high as 8.7% during Sunday night’s crash as market participants converted to stables. Due to the sell-off, the total number of stablecoin transfer transactions hit its highest number since Aug. 25 2022, according to Atermis Terminal.

Throughout the frenzy market participants used Tether’s USDT as their stablecoin of choice. USDT recorded $185 billion in 24 trading volume according to TradingView compared to USDC’s $24.5 billion, and USDT dominance rose by 7%.

Beside being the largest stablecoin by market capitalization, Tether’s Q2 audit also provided users with a sense of safety surrounding the asset. In the company’s public statement, Tether reported $5.2 billion in additional reserves that could be used to help maintain USDT’s peg in a black swan style event.

DeFi Liquidations

Massive demand was placed on stablecoin reserves as the market faced panic selling and liquidations. Decentralized Finance (DeFi) platform AAVE processed $400 million in liquidations on Aug 4, and their GHO stablecoin maintained its peg throughout the forced selling.

Stani Kulechov of Avara took to social media this morning to highlight the strength and said “Aave Protocol withstood market stress across 14 active markets on various L1s and L2s, securing $21B worth of value”.