June 15, 2023

Better safe than sorry: USDT -> USDC

Curve Finance's USDT/USDC/DAI stable exchange pool is starting to skew towards USDT oversupply.

Currently in the pool:

65M DAI
62MUSDC
244MUSDT

65% of the pool is USDT stable.

Market behavior is generally clear: over the past 8 months, we have seen:

- termination of BUSD stable minting, with capitalization reduced from $23.5B to $4.5B BUSD.

- USDC food, when on the weekend in March 2023 the rate reached $1.13 USDC per $1 USDT, due to the fact that more than $8B of reserves were stored in the Silicon Valley bank, which burst. Disgusting communications from the USDC issuer undermined the credibility of this stable and the mass exodus from the stable reduced capitalization from a peak of $55B, from a pre-bankrupt $44B (March 2023) to $28B USDC.

It would seem that there is only one winner in the stablecoin market - USDT, which managed to increase the volume of stablecoins in circulation to $83.5B USDT from $71.5B USDT at the time USDC started having troubles on the problems of its neighbors.

At the same time, USDT in May 2021 after the collapse of UST on panic sentiment fell against other stables by 10-11%.

The speculative idea is simple: the SEC is starting to run out of steam after attacking Binance and Coinbase, Paxos, TUSD and shutting down crypto-friendly US banks. The queue to direct food to Tether. Food is cyclical, so you can expect attacks on the USDT issuer.

At the moment, it is possible to exit USDT on the curve with a loss of 0.1%, which is insignificant compared to a possible deposit of the 2021 level.

If the food is not confirmed, it will be possible to switch back to USDT at an identical price, so I see an asymmetric rate for myself - the opportunity to buy USDT closer to the weekend at a discount relative to USDC, which has already gone through all possible cataclysms this year.

It seems that regulators may be attracted by an attack on tether, because it plays a significant role in the cross-border movement of capital, including between countries that are under sanctions, and the Stranglehold 2.0 operation, which is unleashed against cryptocurrencies in the United States, will not be complete without a blow to main source of circumvention of US-imposed "rules".