As the Alameda/FTX/Binance drama enters its most dangerous phase, traders are aggressively moving their funds to stablecoins. However, even USD-pegged assets are far from being "safe haven" assets today.
USDT down, USDC, BUSD up: Unmatched volatility in stablecoin segment
Today, Nov. 10, 2022, traders and analysts noticed unusual activity on Curve Finance (CRV) and Aave (AAVE) pools. Alameda Research allegedly started "shorting" U.S. Dollar Tether (USDT), the largest stablecoin, by swapping borrowed USDT to USD Coins (USDC) by Circle.
Alameda research is opening shorts on USDT.https://t.co/J3wzpOZ4G4 pic.twitter.com/sAdl0OK1SM
— mhonkasalo (@mhonkasalo) November 10, 2022
This monstrous activity immediately caused an imbalance in the USDT peg: the asset dropped below $0.98 which is the lowest level since the UST collapse in May. By contrast, USDC "spiked" to $1,007. This imbalance unlocks dangerous arbitrage opportunities.
Then, Tether Limited, an operator of USDT, blocked the FTX-backed address with over $46 million in the largest stablecoin. This restriction was registered by automated tracking services.
❄ An address with a balance of 46,360,701 #USDT (46,274,472 USD) has just been frozen!https://t.co/W958MBbhA9
— Whale Alert (@whale_alert) November 10, 2022
Binance's stablecoin, BUSD, benefited from this panic the most: its price jumped over $1,012 as USDT holders started exchanging their funds to BUSD.
Decentralized stablecoins USDD, FRAX affected as well
Even EUR-pegged stablecoins suffered from the ongoing euphoria. Eurocoin (EUROC) by Circle jumped over €1.04 on major spot exchanges, according to CoinGecko.
The worst sufferers of this drama so far are decentralized stablecoins. USDD, an algorithmically-backed stablecoin by Tron (TRX) ecosystem, plunged to $0.968 briefly. Justin Sun immediately injected new liquidity into a basket of assets backing USDD.
Frax Finance (FRAX), the smallest hybrid stablecoin with a $1+ billion capitalization, slid below $0,966. Both USDD and FRAX are still trading below $1 as of press time.
Arman Shirinyan
Alex Dovbnya
