The liquidity in Curve 3pool has decreased significantly from $5.5 billion in January 2022 to $600 million currently, according to Kaiko data. The pool consists of the three major stablecoins – USDC, USDT, and DAI, with USDC accounting for 35.37%, USDT for 32.6%, and DAI for 32.02%. Curve’s 3pool is the largest liquidity pool on its decentralized exchange, providing traders with an efficient way to swap between stablecoins.
During market volatility, the imbalance in the 3pool can indicate traders’ preferences for different stablecoins. For example, during the time of Terra UST’s collapse and FTX’s bankruptcy, there was a shift in stablecoin preferences in the pool. USDT, which accounted for over 80% of the pool at that time, saw a decrease in favor of DAI and USDC due to concerns about its peg to the U.S. dollar. This imbalance could potentially lead to a liquidity crisis if more traders try to withdraw funds in a different stablecoin than the one deposited.
Nowadays, the stablecoin reserve in 3pool has returned to balance, with a noticeable increase in swaps of USDC for USDT, exceeding the reverse by $120 million this year. This trend indicates a preference for USDC over USDT, with a $90 million difference seen just over the past weekend. The researcher at Kaiko, Riyad Carey, highlighted this shift in stablecoin preferences, suggesting that USDC has been more popular than USDT in recent trading activities.
Overall, the decrease in liquidity in Curve 3pool highlights the dynamic nature of stablecoin preferences in the DeFi market. Traders’ choices can shift rapidly during times of market stress, as seen during the events surrounding Terra UST and FTX. The importance of maintaining balance in liquidity pools like 3pool is crucial to prevent potential liquidity crises and ensure efficient trading between stablecoins. As the DeFi market continues to evolve, understanding and monitoring these trends in stablecoin preferences is essential for traders and platforms like Curve.
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