TL;DR Breakdown
- DAI has surpassed BUSD to become the third-largest stablecoin by market capitalization.
- DAI’s unique features, including over-collateralization and redemption mechanisms, have contributed to its rise.
- Regulatory challenges have impacted BUSD’s market capitalization, while DAI continues to gain prominence in the stablecoin market.
Description
MakerDAO’s DAI has surpassed Binance USD (BUSD) to become the third-largest stablecoin by market capitalization. With a current market valuation of approximately $4.394 billion, DAI has now taken the coveted position, while BUSD’s market capitalization stands at around $4.609 billion at the time of writing. BUSD’s previous position as the third-largest stablecoin resulted from Terra … Read more
MakerDAO’s DAI has surpassed Binance USD (BUSD) to become the third-largest stablecoin by market capitalization. With a current market valuation of approximately $4.394 billion, DAI has now taken the coveted position, while BUSD’s market capitalization stands at around $4.609 billion at the time of writing.
BUSD’s previous position as the third-largest stablecoin resulted from Terra USD’s (UST) decoupling from its $1 parity in May 2022, leading to a significant decline in Terra UST’s value.
However, recent developments caused the reshuffled of the stablecoin rankings. Notably, the New York Department of Financial Services (NYDFS) instructed Paxos, the issuer of BUSD, to halt its minting activities. This regulatory action resulted in the redemption of a substantial amount of BUSD, eventually surpassing DAI in market capitalization.
DAI’s unique characteristics
DAI sets itself apart from other stablecoins in the market, such as Tether (USDT) and USDC Coin (USDC). Unlike its counterparts, DAI requires collateral to be locked up to generate new tokens. This over-collateralization approach ensures the stability and value of DAI, with additional collateral being necessary for minting and redeeming DAI tokens. In contrast, Tether and Circle act as central issuers for their stablecoins, backing them with collateral held by the issuers themselves.
In recent months, DAI’s activity has leaned towards redemption rather than minting, leading to a significant decrease in its circulating supply. Since February 2022, DAI’s market valuation has dropped by 55.16%, currently reaching approximately $4.296 billion. Similarly, BUSD has experienced a reduction of 22.5% in the past month, while DAI’s circulating supply has decreased by 5.7%.
As DAI climbs the stablecoin rankings, Binance‘s BUSD has faced legal challenges and regulatory scrutiny, contributing to its decline. The market capitalization of BUSD has declined to $4.3 billion amidst the regulatory drama surrounding Binance.
The decline in the stablecoin market, including BUSD, reflects the regulatory pressures and challenges the digital asset space faces. It also raises concerns about capital draining from the industry. Recent deviations of USDT from its $1 peg have also fueled fear, uncertainty, and doubt (FUD) narratives. However, Tether’s Chief Technology Officer has reassured users that the company is prepared to redeem any amount, aiming to maintain stability in the market.
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