CryptoWinters seems to stay longer than expected affecting various crypto formats. The two most favored stablecoins; Tether (USDT) and USD coin (USDC) have started to show a downfall in the market again. The quantitative tightening of the crypto market specifically, the stablecoins have started once again.
According to a Morgan Stanley report, the two strongest stablecoins showed a decent upsurge in August. However, the stablecoins are now back to halt it seems. The market cap is less by 10% than its April peak.
Demand and Supply – the Major Market Movers
The availability and demand for stablecoins acts as a strong reason behind the market alteration in terms of liquidity. When the market cap falls this equates to quantitative tightening of the market. That is where some influential names get affected like the US Federal Reserve. The financial authorities do have to shrink their balance sheets to remove liquidity from the financial system seeking to prevent the economy from overheating.
Usually, crypto lenders and buyers buy cryptocurrencies in exchange of stablecoins. This tends to make subtle changes in the USDC market capitalization. Morgan Stanley has witnessed several factors leverage building up again in the decentralized Finance (DeFi) ecosystem.
Morgan Stanley has released a report mentioning stablecoins are seemingly contracting as of now. The market is again contracting with two of the strongest stablecoins slipping to the bottom line: Tether (USDT) and USD coin (USDC). The quantitative tightening is pushing the stablecoin market down whereas this is bringing the Bitcoin to the limelight again.
Source: https://www.thecoinrepublic.com/2022/09/01/stablecoin-market-cap-contracting-again-says-morgan-stanley/