Coinbase today announced that it is delisting BUSD from its exchange. The cryptocurrency exchange claims that the coin did not meet its listing criteria for tokens. It is not clear what those listing criteria are since tokens without value or utility, such as Dogecoin, seem to have passed its listing test.
In any case, Coinbase’s decision should not make much difference to BUSD’s prospects. The stablecoin has derived most of its trading volumes from Binance during its short life.
Coinbase’s decision to make a formal announcement about its delisting was a no-brainer after action by the Securities and Exchange Commission (SEC) against the stablecoin.
As Ram Ahluwalia, founder of Lumida, explained to CoinDesk this morning, the San Francisco-based exchange has only two paths available to it, given its regulated status. It can either toe the SEC’s line by delisting the offending coin or commence litigation against the agency. The latter option is an expensive and could make the exchange itself a target for regulators.
More bad news for BUSD and Binance came in the form of a Forbes investigation. According to the story’s authors, Binance moved about $1.8 billion of collateral meant to back its stablecoin to other entities, including trading firms and hedge funds. As usual, Binance failed to provide a satisfactory answer to explain why funds from its wallets earmarked for customer funds were commingled.
That BUSD’s days are already numbered is already a foregone conclusion. Whether the stablecoin ends up taking the world’s biggest cryptocurrency exchange down with it is the question.
Stablecoin Supply Turns Negative
Another sign of end times for cryptocurrencies is coming from the stablecoin ecosystem. According to analytics firm Glassnode, supply for the four biggest stablecoins – Tether, USDC, BUSD, and DAI – in crypto has turned negative since last September.
Because they are supposed to be backed by fiat currencies, stablecoins are generally the first point of entry for most investors to crypto. A negative supply should translate to decreasing demand for such coins and fewer fresh investors in crypto.
Whether that is the case in the present situation is not clear. BUSD’s problems have significantly reduced the stablecoin’s amount circulating in crypto markets. Meanwhile, other stablecoins also claim to have processed redemptions running into hundreds of millions of dollars after the FTX crash in November. That means coins equal to the redemption amount have been taken out of circulation.
Bitcoin price has trended downwards with declining stablecoin supply. The cryptocurrency fell below $16,000 in the first week of November after the collapse of cryptocurrency exchange FTX and seems to have bounced back in recent times, giving rise to hope that a price revival might be underway.
But Glassnode’s findings mean that it is recycled money sloshing around in search of profits in crypto that is responsible for recent bumps in bitcoin price. As of this writing, bitcoin price is at $23,505, relatively unchanged from a day earlier.