Coinbase delisting sinks Binance USD Stablecoin Market Cap

Coinbase, a U.S. crypto exchange, said this week that it would stop trading BUSD on March 13.

On Friday, the market capitalization of Binance USD, the Paxos-issued stablecoin under the name of the world’s biggest cryptocurrency exchange by trading volume, plummeted to $9.5 billion.

Since June 2021, this is the first time the circulating quantity of BUSD has fallen below $10 billion.

When Paxos declared on February 13 that it will cease minting new BUSD tokens, citing directives from the New York Department of Financial Services, demand for BUSD declined precipitously (NYDFS).

Meanwhile, the U.S. Securities and Exchange Commission (SEC) allegedly planned to file a lawsuit against Paxos for providing unregistered securities.

Since February 13, according to blockchain data compiled by the crypto intelligence company Nansen, investors have redeemed almost $6.7 billion worth of BUSD from Paxos. 

Due to declining demand, dogecoin (DOGE) has surpassed bitcoin (BTC) as the ninth-largest cryptocurrency by market capitalization.

U.S.-based crypto exchange giant Coinbase announced this week that it will pause trading of BUSD on the platform starting March 13. Coinbase Chief Executive Brian Armstrong cited liquidity concerns for delisting the stablecoin.

“Coinbase’s decision to delist was probably done as a precaution in case there was a drop in liquidity or problems with redemptions in the future.” Clara Medalie, director of research at crypto market research firm Kaiko, stated.

According to data from Kaiko, the daily trading volume for BUSD on Coinbase in the last two months was only about $9 million, and the market depth within 2% of the market price was only $600,000.

This means that the price of the stablecoin can change. The greater the market depth, the greater the price stability. Last month, BUSD liquidity on Binance, the stablecoin’s primary exchange, decreased substantially.

According to data from Kaiko, the amount of money in the BUSD-USDT and BUSD-DAI stablecoin markets within 2% has dropped from $200 million in February, before Paxos made its announcement, to $123 million.

Not ideal for a Stablecoin that should supposedly always trade 1:1 with the U.S. dollar, according to Medalie.

Liquidity is deteriorating for Binance USD as crypto investors have redeemed some $7 billion of tokens from issuer Paxos since regulators ramped up pressure on the stablecoin