Citi Says Crypto Market Volatility Has Affected User Adoption

Concerns about stablecoins following UST’s collapse have exacerbated declines in digital asset prices, the bank said.

Jun 8, 2022 at 9:19 a.m. UTC

Updated Jun 8, 2022 at 6:06 p.m. UTC

Will Canny is CoinDesk's finance reporter.

Cryptocurrencies are notably below their peak and mounting concerns about stablecoins following the collapse of terraUSD’s (UST) has led to outflows from the largest stablecoin tether (USDT), Citibank (C) said in a report Tuesday.

These concerns have most likely compounded declines in crypto markets, the report said.
“Volatility has affected user adoption,” the Wall Street giant said, noting that trading volumes and active addresses spiked around the time of the luna (LUNC) collapse, which indicates user adoption, but these increases have since reverted to previous levels, or even lower.
According to Citi, “Tentative evidence suggests a reduction in trading volumes and futures positions but not wholesale declines in investor interest in the space."
”After luna’s collapse, there were concerns about outflows in USDT, but these have since slowed," the bank said. Some flows went to the more “transparent and centralized” USD coin (USDC) stablecoin, while others exited the market altogether.
Total value locked (TVL) in decentralized finance (DeFi) has fallen in U.S. dollar terms but is stable in terms of ether (ETH), especially when accounting for the value lost in the Anchor protocol following the collapse of UST and LUNC, the note said.
DeFi is an umbrella term used for lending, trading and other financial activities carried out on a blockchain, without traditional intermediaries.
Morgan Stanley (MS) said weakness in crypto markets, the failure of a dollar stablecoin and a reduction in leverage in DeFi was resulting in the “crypto equivalent of quantitative tightening,” in a report Tuesday.

Read more about

Stablecoins Citi Volatility DeFi

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.