Stablecoin Storm — Gemini’s GUSD Shrinks 93% Amidst Market Turbulence

Over the past few years, the stablecoin market has significantly slowed, particularly since mid-2022, following the collapse of Terra’s stablecoin. Additionally, last year, the New York Department of Financial Services (NYDFS) instructed Paxos to cease the issuance of BUSD. Beyond these setbacks, the supplies of three other stablecoin assets have drastically reduced, now garnering minimal attention. For example, Gemini’s stablecoin GUSD has seen a staggering 93% reduction in its supply.

Dollar-Pegged Tokens Navigate Turbulent Waters Amid Plummeting Supplies and Shifting Ranks

As of June 2023’s close, Gemini’s stablecoin GUSD ranked as the ninth largest stablecoin by market capitalization. In the same period, it earned an A grade from the independent, nonprofit stablecoin rating firm Bluechip. Nevertheless, the report pointed out that GUSD is “not widely used in the crypto markets, and hence lacks significant liquidity on exchanges.” At that time, GUSD’s market capitalization stood at approximately $564.86 million, but it has now plummeted 93.10% to $38.93 million.

To illustrate the scale, Gemini’s stablecoin now represents a mere 0.0423% of USDT’s hefty $92.10 billion market cap. Moreover, GUSD’s global trade volume over the past day barely exceeded a million dollars, dwarfed by USDT’s $52.51 billion. Consequently, GUSD’s ranking slipped from the ninth largest stablecoin to the 24th, and it’s currently placed 667th among 12,000 crypto assets. While the primary exchange for GUSD is Gemini, it’s also traded on Coinbase and Curve.

This year has also seen a diminution in another stablecoin, Paxos’ pax dollar (USDP), which boasted a market valuation of a billion dollars until the end of June. Presently, USDP’s market cap has diminished to $369 million, reflecting a 63% downturn or a $631 million loss. Despite this decline, USDP retains its position as the ninth largest stablecoin by market valuation, though it ranked as the seventh largest back in June 2023. The contraction of BUSD issued by Paxos was anticipated, yet the subsequent shrinkage of USDP was unexpected.

Nonetheless, Paxos recently received approval from NYDFS and is strategizing to broaden its stablecoin’s presence on Solana. Conversely, the stablecoin has only managed a global trade volume of $3.87 million, a figure significantly overshadowed by titans like USDC, which saw $9.49 billion in trades over the past day. Another digital currency pegged to fiat, magic internet money (MIM), created by the defi project Abracadabra Money, has receded in the stablecoin hierarchy. Before Terra’s downfall, MIM ranked as the sixth largest stablecoin.

Currently, MIM has descended to the 21st spot, plummeting from a market valuation of $2.81 billion in April 2022 to today’s $51 million. Earlier this year, particularly around the end of February, MIM’s market cap was twice its present size before experiencing a sharp contraction. With a trading volume of approximately $309,079, MIM’s activity is notably low, even when compared to smaller trade volumes. Presently, MIM is most actively traded on Trader Joe, with other notable platforms including Camelot and Uniswap V3, primarily paired with wrapped avalanche (WAVAX).

GUSD, USDP and MIM have seen stark descent over the past 12 months evoking a sense of impermanence in the market. MIM’s downward flywheel started after Terra’s UST saw its value evaporate, while GUSD’s and USDP’s downturns took place in 2023. The failure of UST shook the crypto industry and even USDC saw a depegging incident take place when Silicon Valley Bank collapsed in March 2023. With memories of these turbulent waters, the stablecoin market is seemingly at a crossroads. While things look cautiously optimistic in the world of stablecoins, no one knows what the tides may bring.

What do you think about GUSD, USDP, and MIM’s descent over the past year? Share your thoughts and opinions about this subject in the comments section below.