Analysis: Stablecoin exchange activity since Black Thursday

Stablecoins have the potential as an emerging payment technology and an efficient medium of exchange. To date, however, stablecoins have predominately been used for reducing risk-on exposure from the volatility seen throughout digital assets, and for value transfer between exchanges. One way of determining how stablecoins are being utilized is to analyze their activity on exchanges. We will highlight the balances of stablecoins on exchanges relative to their supplies, in addition to some noticeable trends. Activity since Mar 12, or "Black Thursday," a day when the price of Bitcoin plummeted by nearly 40%, provides us with a sample of how exchange activity around stablecoins reacted to such a decline in market prices. 

Source: Coin Metrics, Glassnode, The Block Research

Since Mar 12, the number of stablecoins held on exchanges in our sample has increased by 130%. The notable expansion may be explained by investors and speculators converting assets to stablecoins due to a decreased appetite for risk after seeing market prices diminish in such short order. 

The 30-day average for stablecoin balances on exchanges reached a high of $2,513,980,516 on April 30. Tether represented approximately 81% of the balance. Following the peak, the aggregate balance of stablecoins on exchanges has declined slightly by 7%. 

Source: Coin Metrics, Glassnode, The Block Research

A more granular view of each stablecoin balance on exchanges reveals how individual stablecoins have reacted since Black Thursday. BUSD, HUSD, Tether, and USDC all had significant increases in their balances on exchanges, while the balances of the others declined. The four stablecoins that saw increases also make up the top four in value on exchanges. The information provided by this small sample can suggest that currently BUSD, HUSD, Tether, and USDC are the preferred stablecoins for users on centralized exchanges when users are looking to convert their assets to a stablecoin. 

Percent Change and Exchange Balances can be viewed in the table below

Source: Coin Metrics, Glassnode, The Block Research

Percent of Stablecoin supply on Exchanges

Source: Coin Metrics, Glassnode, The Block Research

The two stablecoins with most of their supply on exchanges were both released by exchanges themselves. While the total percentage of HUSD’s supply on exchanges has declined slightly, approximately 97% of its supply is still hosted on exchanges. The supply of BUSD has declined as of late. But the overall trend has been upwards, and currently, 82% of the supply is on exchanges. 

Like BUSD, Tether supply on exchanges relative to its supply has declined lately, but overall it is up from 16.2% to 28.1% year-to-date. 

USDC has been the one outlier out of the four stablecoins that saw increases to their balances on exchanges. Despite an increase in its balance on exchanges, it has had a consistent decline in its overall percentage on exchanges relative to its supply. An explanation for this can be that USDC is being used for other applications which include lending products and open finance (DeFi) apps. 

DAI+SAI has the lowest percentage of its supply on centralized exchanges by a large margin. Currently, approximately 2.1% of its supply is on exchanges, whereas the next lowest is Paxos at 16.7%. 

Source: Coin Metrics, Glassnode, The Block Research

A possible explanation for the low percentage for DAI+SAI is that the majority of DAI+SAI is taking place in Open Finance applications rather than centralized exchanges. Support for DAI+SAI by centralized exchanges is low and even the ones that do (e.g. Coinbase) often don’t have the most liquid markets when compared to their decentralized counterparts (e.g. dYdX). 

The lower percentage of supply on exchanges could suggest that DAI is one of the few stablecoins being used as money for other applications besides just speculating/trading crypto on exchanges. 

Source: Coin Metrics, Glassnode, The Block Research

Source: Coin Metrics, Glassnode, The Block Research

The day after Black Thursday (Mar 13) was the first time in over ten months that the exchange net flow of all stablecoins was positive. Before that, the last time was June 28, 2019, when the price reached nearly $14,000 before crashing by 15% in less than an hour. One explanation for the positive deposits for all stablecoins to exchanges could be that users were depositing stablecoins to exchanges in order to purchase assets that had recently seen price declines. The net flow of stablecoins to exchanges in these two instances provides us with two samples of the actions of users with stablecoins when crypto markets experienced sharp declines.