Sam Boughedda

Sheena Shah from Morgan Stanley wrote in a Tuesday note that crypto price weakness, failure of a dollar stabilitycoin and reduction of leverage DeFi were causing the crypto equivalent (QT) of quantitative tightening.

An analyst asked questions like who has redeemed USD, the most stablecoin that has had $10bn in redemptions, recently. Shah also wondered if the USD peg has enough liquidity.

Without stablecoin issuance increasing, investors are redeeming USDT in record numbers, reaching $10.6bn over the past month. Shah explained that the crypto equivalent is quantitative tightening. The total stablecoin markets cap drops and liquidity on centralised exchanges, leverage on lending platforms, falls even faster.

“Of $10bn in redemptions, $5.9bn was on TRON blockchain. Surprisingly, it is much lower than on. Binance is the cryptocurrency exchange that holds the most USDT (worth $121bn), and controls 49% of USDT on TRON,” said the analyst.

Shah believes that there are no systemic risks from crypto weakness to fiat banking systems at the moment. The analyst however warned that USDT would experience more severe spillovers into risk and crypto markets, if USDT falls below the $1 peg.