Analysts from S&P Global have recently shed light on the prevalence of ‘de-pegging’ in well-known stablecoins such as USDC and DAI. Stablecoins are cryptocurrencies designed to maintain a one-to-one relationship, or ‘peg’, with a stable asset, usually a fiat currency like USD. However, despite the design, some of these coins have seemingly fallen off their pegs more than others.
According to a research paper authored by Dr. Cristina Polizu, Anoop Garg, and Miguel de la Mata, de-pegging has been more common for USDC and DAI compared to its counterparts, Tether (USDT) and Binance USD (BUSD). Over the past couple of years, both USDC and DAI have reportedly spent more time below dollar parity than both USDT and BUSD.
In terms of the duration of de-pegging, the longest and deepest instance was witnessed with USDC falling below $0.90 for 23 minutes and DAI for 20 minutes. In comparison, USDT dipped below $0.95 for only one minute, while the price for BUSD did not drop below $0.975 at all between June 2021 and June 2023. The researchers noted that short, minute-long de-pegs “can be attributed to noise,” especially around dollar thresholds.
The study found that the silicon valley bank collapse resulted in a significant drop to $0.87 for USDC. USDC Issuer Circle had a substantial $3.3 billion of its $40 billion USDC reserves with the unstable bank at the time. Meanwhile, MakerDAO held a hefty 3.1 billion USDC in reserves, which collateralized DAI and resulted in its de-pegging.
Despite the recognized issues with de-pegging, the report stated that keeping a stablecoin on peg requires good governance, adequate collateral and reserves, market confidence, and adoption. It appears that Tether, despite previous mainstream media scrutiny, has proven to be steady despite the criticism.
Meanwhile, in terms of market presence, the supply of USDT has increased by 25% since the start of the year to 83 billion, commanding a stablecoin market share of 67%. In contrast, the supply of USDC has shrunk by 41.5%.
Source: Cointelegraph
