Binance Converts Stablecoins to BUSD: Is Tether Now Losing Market Share?

Binance, the world’s largest crypto exchange (in terms of trading volume), will automatically convert users’ stablecoin holdings to its own BUSD stablecoin in the future. With this, Binance wants to improve liquidity and user experience. Isn’t it just about the interests of the stock market?

Crypto exchange Binance announced automatic conversion to USD Coin (USDC) and other stablecoins. According to a September 5 Twitter post, Binance will convert USDC, Pax Dollar (USDP) and TrueUSD (TUSD) to BUSD. This affects both the existing stablecoin shares on the exchange and new stablecoin deposits from users. Tether’s USDT stablecoin can continue to be used as normal.

The new feature will launch on September 29, 2022.

Stablecoins are converted at a 1:1 ratio and then automatically appear in a combined BUSD balance. According to Børsen, this is Measure to improve user liquidity and capital efficiency. Binance stated that users will still be able to withdraw USDC, USDP and TUSD from their combined BUSD balance at a 1:1 ratio.

Binance will also delist stablecoin spot trading pairs. A conversion between the affected stablecoins is no longer possible on the exchange itself. Binance will also remove USDC futures contracts, meaning you will no longer be able to use USDC as collateral for futures contracts. Additional changes such as Liquid Swap, the Saving and Staking feature, crypto credits, Binance Pay and Binance Gift Cards will follow.

Binance removes major stablecoins for trading

The automatic conversion could have a big impact on the stablecoin market, which Tether (USDT) currently dominates. The controversial Tether supply currently stands at $66.2 billion, while the BUSD token supply is equivalent to $19.1 billion. In recent months, Tether’s stablecoin market share has continued to decline. Currently, Tether has a market share of 46.7%, Circle (USDC) has a market share of 30.36%, and BUSD has a market share of 13.73%.

Stablecoin Offerings An image of: The Block

USDT’s market cap is currently $67.4 billion, well above BUSD ($19.4 billion) and USDC ($51.8 billion). In the DeFi market, the stablecoin market cap is even smaller. One of the most popular DeFi stablecoins, DAI has a market cap of $6.4 billion.

With the automatic conversion, the trading volume of BUSD is also likely to increase further. But how does the move affect its two biggest competitors, USDT and USDC?

Will Tether lose market share?

The new automatic conversion to BUSD sparked quite a discussion on social media. However, many related analyzes and claims are incomplete or incorrect.

Wintermute CEO Evgeny Gaevoy corrected what he believed to be misleading headlines on Twitter. According to Gaeoy, the elimination of stablecoin pairs will benefit the liquidity of the trading pair and increase the efficiency of the market. Exchange customers benefit the most, as they no longer have to convert stablecoins to other stablecoins.

Additionally, he wrote that Binance’s automatic conversion will have some positive impacts on all stablecoin providers involved. Tether, on the other hand, will suffer some disadvantages as a result of the new feature.

For example, the liquidity of non-USDT based trading pairs will continue to increase. As a result, trading volume for USDT decreases. And since converting BUSD and USDC between exchanges is significantly easier than converting USDT against other stablecoins, Tether could lose further market share. Gaevoy concluded that Tether’s market strength may decline and US-based stablecoins (BUSD, USDC) may continue to rise.

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