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45% of stablecoin balance has left crypto exchanges in 4 months, but where has all the money gone?

45% of stablecoin balance has left crypto exchanges in 4 months, but where has all the money gone?

Key Takeaways

  • $23.6 billion of stablecoins are currently on exchanges, the least since October 2021
  • 45% of stablecoins have fled exchanges in the last four months
  • 61% of USDC has left exchanges in the three weeks since Silicon Valley Bank’s collapse, while 50% of BUSD has evaporated since regulators announced it was to shut down
  • Trend in falling supply of stablecoins has been ongoing since FTX collapsed in November, but has worsened recently
  • Capital is flowing into T-bills, with 5 times the amount of treasury accounts created last year as 2021
  • Bitcoin’s falling price and volumes are more extreme, but liquidity has been siphoned out of the markets at large due to rising interest rates 
  • Federal Reserve is now caught between rock and a hard place, as rising interest rates needed to combat inflation but banking sector wobbles may force its hand

It’s always turbulent in the crypto markets. 

The waters have been particularly choppy recently with regard to the stablecoin market. There are currently less stablecoins on crypto exchanges than at any point since October 2021. 

But where is all the money going? Into Bitcoin? Hidden away in cold wallets? Away from crypto altogether?

In this piece, we dig into the data to try to ascertain where exactly the money is moving, and why, as well as what it means for Bitcoin and how it all ties back to the Federal Reserve. 

The flight of stablecoins

First things first. Stablecoins are fleeing exchanges at an unprecedented speed. In less than four months, 45% of stablecoins have left exchanges. That is a drawdown from $43.1 billion to $23.6 billion, a pace that has never been seen before. 

The chart shows a clear downward trajectory since the implosion of FTX in November 2022 – with the pace picking up since the turn of the year. 

In the next chart, we focus on the outflows alone, helping us to zone in on the speed of these movementts and how they compares to previous periods of outflows. 

We can see that in terms of precedent, we saw big spikes in outflows in May 2022 (when LUNA collapsed) and May 2021 (when Bitcoin freefall down from $58K to $37K in a week, despite no obvious trigger). But the difference this time is that the elevated pace of withdrawals has continued for a much longer time period, at four months and counting. 

Perhaps layering in price gives more of an…

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