With some exchanges holding much more power than others, some moves can be interpreted as market manipulation. In our case, the removal of all pairs with USD-pegged stablecoins by Binance seems quite sketchy considering that the company will try to merge all liquidity into one pair — BUSD. On paper, the change will bring fewer slippages and delays allowing traders to earn more on the spot market. On the other hand, the absence of other stablecoins may affect how many users see them and negatively influence their user bases.
See, Binance is a massive CEX that has close to a 17% market share and serves millions of customers across the globe. Many of these traders are using USDC, TUSD, or USDP as their stablecoins of choice. Binance announced that it will be slowly removing all of them from the list of trading pairs, but will start with USDC. The representative of the company says that users will be able to deposit and withdraw these stablecoins, but won’t be able to trade them directly.
The news comes after the negatively received decision by USDC to ban wallets that had transactions involving Tornado Cash that was devastated by the Federal Government of the US. The decision to stop working with USDC is also not a surprise to the community, as news stories about the dwindling supply of USDC on the Binance exchange were circulating at the end of August. USDC is still one of the biggest stablecoins in the world with its $52 billion market cap following closely that of Tether ($67 billion).
BUSD backed by Binance and used for most operations on the platform has the third largest market cap (over $19 billion), but will most certainly see more activity if the exchange removes other stablecoins as alternatives. While many traders believe that nothing bad can happen with the implementation of this change, we argue that the move can significantly reduce the market caps of USDP (currently, $945 million) and TUSD ($1 billion) and scare some Tether backers.
Note that many people are still anxious about stablecoins in general after Terra Luna’s fiasco.