Russia Fears Drop Bitcoin While Stable Coins Hold Steady

In the past 24 hours, bitcoin has dropped almost 5%, falling from $46,000 to less than $43,000, at the time of writing. The factor behind the sell0ff appears to be the heightened fear that Russia intends to invade Ukraine.

Despite the weakness, not all market segments have experienced losses, e.g. stable coins. Per CoinGecko, the supply of USDC, BUSD, and FRAX have increased 18%, 27%, and 27%, respectively, over the past 30 days.

Furthermore, during the previous weeks, investors had been rotating into yield-bearing stable coins like UST, FRAX and MIM quite heavily. However, the bounce in prices this week and protocol issues have led some stable coins to slip.

The recent scandal involving Wonderland and Abracadabra Money founders, has left the MIM supply plummeting from its previous highs. Despite once being a high-flyer, supply of MIM has decreased 40% over the past 30 days, per CoinGecko.

UST’s rate of growth has slowed recently as well. The likely reason is that investors are waiting to see how things with Anchor/UST dynamics. Per OpenNetwork, Brendan Murray states that “38% of outstanding UST supply is currently held in Anchor, where lenders are earning a yield of 19.5% APR on their deposits. Anchor’s reserves have been dwindling, leading to a recent recapitalization…As this imbalance grew, Anchor’s ability to maintain ~20% yield came into question. If the reserves go to zero, Flipside analyst jxboi found that yield would fall to ~7.4% APY.”

FRAX has faired the best out of the bunch with its market cap stable around $2.6 billion over the past 7 days. The increased market volatility saw FRAX’s collateral ratio increase ever so slightly to 84.50% from 84.25%.

However, Frax’s AMO strategies continue to print money for the protocol; benefiting both the reserve and holders. Per their dashboard, accrued profit for Frax Finance’s AMO strategies are ~ $68M; soaring since inception.

In the event that the geopolitical situation gets worse, investor’s rotation into stable coins are likely to accelerate with leaders like FRAX benefiting the most on a percentage basis.