Stablecoins play an important role in the crypto ecosystem, with the two largest stablecoins, USDT and #USDC , each facilitating billions of dollars of volume every single day. Maintaining a stable peg requires the confidence of not only arbitrageurs, but also of wider market participants and #stablecoin holders in general. 

Stablecoin supply growth occurs when clients wire real-world USD to Circle or #Tether . When clients deposit funds, stablecoins are minted by the respective suppliers and credited to the client's custody, which the clients can then withdraw on-chain. Conversely, when stablecoins are redeemed for fiat, the reverse occurs - stablecoins are returned to the custody of the supplier and burned, and Circle or Tether clients receive USD into their bank account.

Occasionally rapid shifts in market sentiment can catalyze growth of one stablecoin at the expense of the other. In March 2023, concerns arose regarding Circle's exposure to Silicon Valley Bank (SVB), which led clients to fear for USDC’s backing in the event of SVB's collapse.

This fear translated into a tangible drop in the price of USDC on-chain. Immediately, this created a circular arbitrage for Trading Firms registered with Circle and Tether. By redeeming USDC with Circle for fiat USD, they could then use those funds to mint USDT through Tether and repurchase USDC at a price lower than $1, profiting the difference.

This fear-induced arbitrage resulted in a staggering $8.85 billion USDC being burned in March alone. Conversely, Tether minted a total of $9 billion USDT during the same month, with $5 billion on the #Ethereum network and $4 billion on the #Tron network. The majority of the newly minted USDT was sent to exchanges, providing liquidity for the extensive demand for stablecoin swaps.

Despite these market fluctuations, the extensive stablecoin flows did not translate into a significant net total of stablecoins being redeemed. In fact, the amount of stablecoins in circulation on-chain has remained relatively stable since November 2022 - and has in fact increased by $3B between USDC and USDT since the bottom in early December.

For more detail on token flows on-chain, check out Arkham's USDC Token Page. Token Pages provide useful metrics such as market cap, top holders, recent transactions, and aggregated information on token flows over specified time periods.

https://platform.arkhamintelligence.com/explorer/token/usd-coin