First Digital USD (FDUSD) is once again reducing its supply, potentially indicating a market slowdown. This week, FDUSD retired another 75M tokens, continuing its series of withdrawals from Binance.
FDUSD Supply Reduction
In the past week, FDUSD's volume decreased from 3.11 billion tokens to 2.72 billion. This is FDUSD's third episode of adjusting its supply. After the peak period in March-April, FDUSD also withdrew up to 50% of its tokens. The recent round of token withdrawals was done with the assistance of Wintermute, using one of its known wallets to move the stablecoins. The FDUSD was returned to a First Digital Labs wallet.
Market Change Correlation
The latest withdrawal of FDUSD from Binance followed a month of aggressive expansion. In August, FDUSD grew its supply from 1.9 billion tokens to a peak of 3.11 billion. More than 90% of FDUSD volumes are concentrated on Binance. The recent reduction in FDUSD volumes coincided with a drop in the stablecoin’s premium. At the end of August, FDUSD once again dropped to $0.99, signaling that a new deleveraging may be coming. Simultaneously, Tether (USDT) continued to slightly increase its supply, adding about $100 million since August 26.
FDUSD Reserves Profile Change
In its initial stages, FDUSD was fully fiat-backed. However, the composition of reserves was revised about a year ago, and now FDUSD claims backing by both cash and US treasuries. Cash backing fell to under 40%, with the rest of the reserves consisting of short-term T-bills or overnight debt. For other redemptions, buyers will need to use the open market. FDUSD aims to tailor its supply to market demand and is one of the most widely used stablecoins on Binance’s markets.
FDUSD continues to regulate its supply based on market conditions. Recent changes indicate a possible market slowdown, as evidenced by accompanying adjustments in reserves and liquidity management.
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