The crypto market has seen a sharp drop in trade volumes, reaching the lowest level since 2020, according to a new report by the Kaiko Research Team. The report also revealed that TrueUSD (TUSD), a major stablecoin project, is under pressure as its custodian, Prime Trust, struggles with financial difficulties and regulatory issues.
In a recent post by a digital assets market data provider, Kaiko dissected the challenges facing TUSD amidst Prime Trust’s financial crisis. Get the full scoop here:
In today’s Debrief, we explore:
— Kaiko (@KaikoData) July 3, 2023
👉TUSD scrutiny amid Prime Trust troubles.
👉KRW-denominated trade volume surpassing USD volume.
👉BITO trade volume surge as U.S. ETF competition heats up.
…..and much more. Check it out here:https://t.co/Tluzu1bcON
Prime Trust, a Nevada-based trust company that holds digital assets and cash for TUSD and other crypto projects, is facing an $82 million shortfall and has been unable to honor customer withdrawals. The Nevada Financial Institutions Division has filed for Prime Trust to be placed into receivership, a move that could have serious implications for TUSD and the crypto industry.
TUSD, which claims to be fully backed by US dollars held in escrow accounts, has seen a surge in selling on decentralized exchanges (DEXes), where traders exchange it for other stablecoins. The report noted that TUSD’s share in Curve’s TUSD pool reached 70% last week, indicating a lack of demand for the token. However, the price of TUSD against USDT has remained stable at around $0.000290023, thanks to the high liquidity on Binance.
Binance, the world’s largest crypto exchange, accounts for most of TUSD’s trading volume and liquidity. The report estimated that TUSD traded $2 billion on Binance in the second quarter, compared to just $2 million on DEXes. Moreover, Binance offers zero-fee trading promotions for all TUSD pairs, incentivizing traders to use the token. However, this also would create a price volatility risk if Binance’s liquidity declines or Prime Trust’s holdings are liquidated.
Prime Trust currently holds about $68 million in digital assets, including $61 million in AUDIO, a token associated with Audius, a music streaming platform. These holdings amount to about 15 times the daily volume of TUSD on centralized exchanges (CEXs), raising concerns about the potential market impact of a forced sale. Prime Trust also holds about $3 million in cash, which might need to be more to cover its liabilities and customer claims.
TUSD has grown rapidly in recent months, tripling its market cap to over $1.4 billion since March. However, the stability and trustworthiness of the token are being questioned amid the Prime Trust crisis. TrueUSD has stated that it has limited exposure to Prime Trust and is working with other partners to ensure the safety of its funds. However, more than this might be needed to reassure traders and investors looking for more transparency and security in the crypto market.
The crypto market is facing challenges as trade volumes decline across the board. The report also showed that altcoins’ open interest dropped in the second quarter, while Layer 2 tokens lost momentum after strong gains in Q1. Furthermore, EUR-denominated daily volume on CEXs has hit a two-year low as Binance faces difficulties with its EUR banking partner and regulatory hurdles in Europe.
The Kaiko Research Team’s report highlighted the need for more scrutiny and stability measures in the crypto industry, especially as it deals with low trade volumes and market uncertainty. The fate of TUSD and its impact on the crypto market will depend on how Prime Trust resolves its financial and regulatory issues and how Binance maintains its liquidity and reputation.
