Binance burns BUSD, USDC: How will the stablecoin market react
- Binance burns BUSD and USDC, however, the marketcap of both stablecoins remained unaffected.
- Trading activity on the Binance protocol increased, though its price declined.
Binance [BNB] has cemented its place as one of the top centralized exchanges in the crypto sector. Its native stablecoin BUSD, however, did not see the same dominance and has struggled to keep up with the likes of Tether [USDT] and Circle [USDC].
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Binance’s recent burn of BUSD could improve its position in the stablecoin race. Arkham Intelligence’s data indicated that Binance burned 700M BUSD to the Null Address on 18 May. They also burned $250M USDC by the Mint and Burn address.
Binance just conducted their biggest direct burn of BUSD since February this year, on BNB Chain.
Binance burned 700M BUSD to the Null Address around an hour ago.
They also burned $250M USDC by the Mint&Burn address. (these tokens will now likely be released on Ethereum) pic.twitter.com/22tz0KOPvG
— Arkham (@ArkhamIntel) May 18, 2023
For context, a Mint and Burn address is used in cryptocurrency systems for creating new tokens (minting) and permanently removing tokens from circulation (burning). It serves as a mechanism to regulate token supply and maintain stability.
Burning tokens can be seen as a measure taken by Binance to enhance stability and instill confidence in the remaining token holders. By reducing the overall supply, Binance aims to mitigate inflationary pressures and maintain the value and integrity of BUSD and USDC tokens.
However, the burning of these tokens did not result in much positivity for the stablecoins. According to Santiment’s data, the market cap for BUSD and USDC continued to decline, whereas USDT dominated in this sector.
Even though the BUSD stablecoin still had a long way to go to get to the top of the stablecoin market, the Binance protocol was doing relatively well.
Looking at Binance and BNB
According to data from Coingecko, there has been a significant increase in trading activity on the Binance exchange over the past week.
The increased trading activity on the Binance exchange suggests growing market interest and participation, which can potentially lead to higher revenue for Binance through transaction fees.
It may also indicate a strengthening position for Binance as a preferred platform for cryptocurrency trading, attracting more users and fostering liquidity.
Realistic or not, here’s BNB’s market cap in BTC’s terms
Despite the popularity of the Binance exchange, the state of its native token BNB continued to see problems. Notably, BNB’s price reduced from $342.58 to $309 in the last week. In tandem with the declining price, the volume of BNB being traded also fell materially during this period.