First Digital USD (FDUSD), a stablecoin tied to the US dollar, has seen a significant increase in its market capitalization following an announcement by Binance in August. The token, which was introduced on June 1, 2023, on the Ethereum network and the BNB Smart Chain, was officially listed for certain trading pairs on the cryptocurrency exchange in July.
The driving force behind the adoption of FDUSD is Binance’s policy. On August 31, Binance confirmed reports of its intention to discontinue support for the Binance USD (BUSD) stablecoin after a regulatory embargo was placed on the issuance of the token. The New York Department of Financial Services (NYDFS) had already instructed Paxos Trust, the issuer of BUSD, to halt the minting of the stablecoin back in March. Since then, the market supply of BUSD has experienced a sharp decline, plummeting by over 80% in the last eight months.
According to an official statement, the exchange will begin phasing out all BUSD products on its platform and will encourage its 150 million users to exchange their BUSD tokens for other assets before February 2024. In particular, the crypto exchange has been encouraging users to convert their BUSD to FDUSD, offering incentives such as no trading fees and a direct swap ratio of 1:1.
According to data from CoinMarketCap, the market capitalization of FDUSD has increased by 21.49% since August 31, rising from $324.75 million to the current value of $394.68 million. This indicates that Binance’s promotion of FDUSD as an alternative to BUSD is paying off, leading to a rapid increase in the acceptance of FDUSD in recent days.
In comparison, market capitalization is a metric that represents the total value of a cryptocurrency based on its market price and the number of tokens in circulation. As FDUSD is a stablecoin with a fixed value of $1, data from CoinMarketCap shows that over 70 million FDUSD tokens have been in circulation in the past week.
Furthermore, according to DeFi analysis platform DeFiLlama, FDUSD is now the ninth-largest stablecoin in the cryptocurrency market, surpassing other popular assets such as Gemini USD (GUSD).
In addition, Binance announced three new FDUSD trading pairs on September 6, continuing its support for the stablecoin. These trading pairs are DOGE/FDUSD, SOL/FDUSD, and XRP/FDUSD, which will be available for trading on September 7 at exactly 08:00 UTC.
This move comes one week after Binance announced the “gradual” discontinuation of support for the BUSD token and instructed users to convert their BUSD tokens into other assets. The exchange has started the process by delisting eight isolated BUSD and cross-margin pairs.
Following these announcements, the decline of the BUSD market continues, with the token’s market share now at an all-time low of $2.73 billion. More data from DeFiLlama shows that the BUSD market capitalization has decreased by 4.16% and 12.23% in the past one and seven days, respectively. Nevertheless, BUSD remains an important player in the market, ranking as the fifth-largest stablecoin in the cryptocurrency space.
Feature image from CNBC, chart from Tradingview.