Examining the Status of Stablecoin Minting and Burning Activities
As of June 4, six stablecoins — Tether (USDT), Gemini Dollar (GUSD), HUSD (HUSD), PAX Gold (PAXG), TrueUSD (TUSD) and USD Coin (USDC) — have had a total of more than 10,000 minting transactions so far in 2020, totaling $8 billion, with USDT issued on the Ethereum blockchain dominating the stablecoin landscape. The major stablecoin began to explode in early March and drove the market cap of the entire stablecoin market higher. By the end of the April, it was ranked third in size behind Bitcoin (BTC) and Ether (ETH). Its current market capitalization accounts for about 85% of the total stablecoin market capitalization.
During the most volatile session, in March 2020, the number of minting and burning activities was at a peak, and the dollar value of newly issued tokens also reached its highest point.
In terms of burning activities, there have been nearly 5,600 burning events reported so far in 2020, with the total value of destruction exceeding $3 billion.
We looked at the quarterly stablecoin minting and burning records from early 2017. The dollar value of burning and minting in the third quarter of 2019 was at a historical high, and the volume of burning and minting activities reached a historical high in the first quarter of 2020.
Based on the data, we believe that if the trend continues, the number of minting and burning activities for Q2 2020 will be at least equal to the number in Q1 2020.
Significant differences in the number of minting activities
The following figure shows the number of minting activities and the dollar value of stablecoins minted in the first five months of 2020.
Among the stablecoins shown, HUSD initiated 5,280 minting transactions, increasing the overall market value by about $101 million, with an average of $200,000 per minting transaction. USDT only initiated 74 minting transactions, but the overall market value increased by approximately $5.5 billion as a result, with an average of $74 million per minting transaction — 370 times the average value of HUSD minting per transaction.
We also looked at data around stablecoin minting in dollar value and transaction activities. Minting activity reached its peak in March, which was also the month with the largest dollar value minted so far in 2020.
In addition, We found that the dollar value of different stablecoins being minted varies. As shown in the figure below, there are significant differences in the number of minting activities for different stablecoins.
Up to the $10 million range, there are 1,800 minting activities per month on average in 2020 so far, while for larger values, there are less than 30 minting activities on average per month.
HUSD is the most frequently issued stablecoin in the $10 million section, followed by TUSD.
USDT is vastly different from the other five stablecoins and is the one that has minted more than $40 million in a single transaction, these transactions have also mostly concentrated in the $40 million bucket with a total of more than 56 minting transactions so far in 2020. There were only six minting transactions in total in the $10 million to $40 million bucket.
Stablecoin burning transactions rarely occur in significant value and is mostly concentrated within the $10 million range
The data on the number of burning transactions and the total dollar value of destruction of each stablecoin are shown in the following figure. HUSD ranks first in the number of burning transactions and the dollar value of destruction. In addition, although USDT has the least number of burning transactions, the value of destruction ranks second.
In addition, we have observed that if we exclude the USDT data, the frequency and dollar value of stablecoin destruction per month are relatively average, around 1,000 times and $500 million, respectively.
USDT destruction is characterized by a lower frequency of burning transactions but each being high in value. The value of USDT destruction reached 50% of the total burn value during February 2020.
The destruction events are concentrated in the $10 million range and was rarely of high value. Only USDT and USDC made the cut to being greater than or equal to the $40 million bucket per burning transaction.
It is worth noting that burning activities in March only capped at $10 million per transaction, with the highest number of burning transactions occurring so far in 2020.
The rise of stablecoins is inevitable. The sector creates endless possibilities in this volatile parallel financial universe. They are not only bringing liquidity to the ecosystem but also driving significant innovations and creating many other use cases to drive the cryptocurrency industry further. However, the industry has much to address, such as the risks and issues in the stablecoin sector. It is without a doubt that the crypto industry will see continued strong growth of the stablecoin sector, thereby driving meaningful adoption.
This article was co-authored by Harper Li and Johnson Xu.
The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Harper Li is a blockchain and big data lover with a background in quantitative finance. She is currently the senior analyst at TokenInsight, a company that provides investment research, ratings, data analysis, industry insights, investment management services, industry consulting and other services.
Johnson Xu is a devoted fintech professional with a background in finance and computer science and substantial exposure to the cryptocurrency and blockchain industry. He is currently the chief analyst and leads research initiatives at TokenInsight, a company that provides investment research, ratings, data analysis, industry insights, investment management services, industry consulting and other services. His previous experience includes a global, top-tier cryptocurrency exchange and a Fortune 200 consulting company.