Interpreting the intention behind Binance's automatic conversion to BUSD: a joint effort to combat USDT
Clearly, there is a stablecoin that is not included, which is USDT. In the long run, the liquidity of non-USDT trading pairs will increase.Original author: Evgeny Gaevoy
Original compilation: 0x9F, BlockBeats
Yesterday, Binance officially announced that in order to improve user liquidity and capital efficiency, Binance will automatically convert users' existing USDC, USDP, and TUSD stablecoin balances and new deposits into BUSD at a 1:1 ratio. Evgeny Gaevoy, CEO of crypto market maker Wintermute, believes that most news did not correctly reveal the impact of this event on USDC, and made the following 4 clarifications, which are summarized and translated as follows:
1. Canceling most stablecoin trading pairs is a good thing, as it allows liquidity to not be split among multiple stablecoins, making the market makers' job easier and the market overall more liquid.
2. This is beneficial for USDC (as well as TUSD and others); users should still be able to seamlessly deposit or withdraw USDC on Binance. Before this change, users needed to convert USDC to BUSD or USDT to pay for perpetual contract margins.
Now users can skip the conversion step (paying margins directly with BUSD). This provides a better user experience while maintaining the utility of USDC (I even think it’s more useful).
3. Clearly, there is one stablecoin that is not included, which is USDT. This is not beneficial for USDT, as customers will always wonder what makes USDT so "special" that they need to go through the hassle of conversion. In the long run, liquidity for non-USDT trading pairs will increase.
Ultimately, USDT will continuously lose its advantage until it has to improve operational efficiency (minting and burning is a T+1 process, unlike USDC/BUSD/TUSD which is almost instantaneous) and the costs of minting and redeeming.
The former is likely beyond Tether's control, as Silvergate and Signature are unlikely to provide services for Tether (because U.S. regulators dislike it), and these two banks are the places with the most USD fiat liquidity 24/7.
As for the latter, any market maker can mint and redeem BUSD/USDC in seconds without needing Binance to do this. Now, everyone can use this little market-making trick. FTX has been doing the same thing.
4. To summarize: this is not a "delisting" of USDC, but rather a significant step for USDT towards losing to domestic U.S. stablecoins.
Additionally, Circle CEO Jeremy Allaire also expressed agreement with Evgeny Gaevoy's views on social media, believing that this will increase the utility of USDC and predicting that USDT's market share will gradually shift to BUSD and USDC.
