Today, crypto analyst Whale Alert shared data showing that Circle burnt 50 million USDC coins from circulation in the Ethereum main chain. This event is essential as it represents Circle’s ongoing strategic activities within its ecosystem, especially regarding its stablecoin, which is pegged to the US dollar.
USD Coin burning
As per data reported by the market analyst, Circle burnt 50 million USD Coin worth $50,005,000 in the Ether main chain. The burning of the coins is essential as it decreases the total supply of the stable coin, making it scarcer and possibly raising its value.
Token destruction is a mechanism that stablecoin issuers use to decrease the supply of their stable coin circulations. Issuers often remove numbers of tokens in their circulations to influence value dynamics and enhance liquidity within their stablecoin ecosystems. The USDC Treasury chose the Ethereum blockchain for the burning exercise due to its strong technology infrastructure and advanced security.
Why stablecoins gain traction
Stablecoins play an essential role in the broader cryptocurrency ecosystem by providing a stable medium of exchange. In contrast to traditional crypto assets, stablecoins are created to minimize price fluctuations, making them beneficial for hedging, trading, and a convenient store of value.
Stablecoin issuers tightly control the burning process to ensure their stablecoins don’t stroll off from fiat pegging. This method has experienced plenty of success and several stablecoin projects, mainly by USDT and USDC, have adopted it.
Stablecoin burning has a domino effect on the wider cryptocurrency market. By decreasing supply, issuers tighten market pricing and improve liquidity in the market.
Stable coins have been less volatile than other virtual currencies, with fewer price fluctuations and a low risk/reward ratio. Also, these stable assets are adequately protected from price rigging, making them attractive alternatives for traders and investors engaging in the cryptocurrency market.
Investors need these stable coins to trade crypto tokens in a secure environment free from volatility. Based on this utility, stablecoins continue witnessing exponential growth and fulfilling several use cases in the cryptocurrency market.
