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‘Millionaire’ stablecoin wallet addresses surpass 12 million
It appears the number of ‘stablecoin millionaires’ has been growing steadily throughout the year.
According to data compiled by Coin Metrics, the number of stablecoin wallet addresses with account balances over an equivalent $1 million USD has recently surpassed 12 million — up from 4 million one year ago. The stablecoins counted in the analysis include Tether ERC-20 (USDT), Tether TRC-20, Binance USD, DAI, GUSD, HUSD, PAX, and USD Coin (USDC).
The vast majority of addresses holding more than $1 million came from Tether TRC-20 (approx. 8 million), followed by Tether ERC-20 (approx. 3.4 million), and USDC (approx. 1 million). Save for a sharp but brief decline last May, such addresses have increased regularly in the past 12 months.
The number still pales to the number of major cryptocurrency wallets holding more than $1 million. Data from Coin Metrics indicate that there are over 102 million wallet addresses meeting this criteria, denominated in either Bitcoin (BTC), Ethereum (ETH), or XRP. Most notably, the number of “millionaire” BTC wallet addresses has largely remained stagnant since May 2021. But the same cannot be said for ETH or XRP.
Limitations of the data include its basis on all wallet addresses, not unique ones, meaning that the number of individuals holding such wallet balances is likely significantly lower than north of 12 million. The use of stablecoins has advanced drastically in recent years. First starting out as a way for investors to cash out during volatile periods, they can now be used, among other items, for interactions with various types of decentralized finance protocols, such as that of Terra’s Anchor.
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High demand for UST has led to a pool imbalance on Curve Finance, requiring intervention.
On Friday, Do Kwon, founder and CEO of Terraform Labs (TFL), which develops the blockchain ecosystem consisting of Terra Luna (LUNA) and the TerraUSD stablecoin (UST), announced that TFL had donated 12 million LUNA ($1.1 billion at the time of publication) to the Luna Foundation Guard (LFG). LFG launched in January to grow the Terra ecosystem and improve the sustainability of its stablecoins. Kwon noted the funds, denominated in LUNA, will be burned to mint UST to grow the LFG’s reserves:
“We will keep growing reserves until it becomes mathematically impossible for idiots to claim de-peg risk for UST.”
UST is an algorithmic stablecoin with a theoretical exchange rate of 1:1 with the U.S. dollar, and is in part maintained by swapping of/for LUNA tokens when its market value deviates from its peg. The burning of $1 in UST results in the minting of $1 in LUNA and vice versa.
However, due to a high demand for UST on decentralized finance, or DeFi, platforms like Curve Finance, this results in unbalanced pools for swapping stablecoins. For example, as more and more crypto enthusiasts swap their USD Coin and Tether (USDT) for UST, the pool’s reserves will deplete, thereby causing price volatility as supply lags behind demand. Two days prior, TFG had already voted on burning the 4.2 million LUNA left in its treasury to protect UST’s peg. According to TFG:
“LFG will swap the [new] LUNA to UST (swap=burn) and sell the UST to the Curve pool. The proceeds will go back to LFG reserves to purchase BTC.”
Thanks to Terra’s flagship Anchor Protocol, UST is a very popular coin among crypto enthusiasts, which promises up to 20% annual yield on UST savings deposits. However, due to an imbalance of depositors and lenders paying interest, the Anchor Protocol’s reserve (for paying the promised yield) is still on the decline at time of publication, although it recently experienced a massive capital infusion.
If there is any confusion left at this point, we will keep growing reserves until it becomes mathematically impossible for idiots to claim depeg risk for $UST $UST is mighty https://t.co/6xCDPWJUTX
— Do Kwon (@stablekwon) March 11, 2022
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Tether slashes commercial paper by 21% in latest reserves attestation
Tether’s cash and bank deposits also dropped 42% to 4.187 billion, while its allocation to money market funds increased 200% to $3 billion, and its treasury bills grew 77.6% to $34.52 billion.
USDT stablecoin issuer Tether cut its reserves allocation to commercial paper by more than one fifth between September and December last year, dropping from around $30.5 billion to $24.16 billion.
Tether is legally required to disclose its reserves every quarter as part of an $18.5 million court settlement with the Office of the New York Attorney General from February 2021. The firm was alleged to have misrepresented the specific amount of fiat backing USDT in 2017 and 2018.
The latest attestation was conducted by Cayman Islands-based Accountants MHA Cayman and provides a breakdown of Tether’s reserves as of 31 December 2021.
The report states that Tether’s “consolidated assets exceed its consolidated liabilities,” however the difference is minimal with total assets tallied $78.67 billion while liabilities sat at around $78.53 billion.
Tether’s Latest Assurance Opinion Reveals That Reserves Held Exceeds Liabilities ⬇️https://t.co/QXQEQ0go0F
— Tether (@Tether_to) February 22, 2022
The makeup of Tether’s reserves shifted significantly since its prior report from late September, with cash and bank deposits dropping 42% to 4.187 billion, while its allocation to money market funds increased 200% to $3 billion, and its treasury bills also grew 77.6% to $34.52 billion.
The significant amount of commercial paper backing Tether’s reserves — which hit 65.39% as of May 2021 — sparked criticism from onlookers who have questioned the lack of transparency regarding the origins of the paper and its credibility as an investment. There were also concerns last year Tether may be exposed to the Evergrande crisis via commercial paper holdings, although Tether said this was not the case.
Commercial paper is often issued by large corporations and is used for financing payroll and short term-liabilities. It is referred to as unsecured debt as it is usually not backed by any form of collateral.
Tether’s attestation states that $13.93 billion worth of its commercial paper has a maturation window of 0-90 days, $9.94 billion has 91-180 days and $823 million has between 181 and 365 days. Any commercial paper with a maturation period longer than 270 days (nine months) must be registered with the U.S. Securities and Exchange Commission (SEC).
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According to data from Coingecko, USDT’s market cap sits at $79.47 billion at the time of writing, with its biggest competitor USD Coin (USDC) sitting at around $52.7 billion.