Stablecoin Market Cap and Trading Volume Continues to Decline

The Stablecoin sector holds a significant value in the entire crypto space. In terms of its valuation and the utilities the crypto assets in the landscape bring. But, the growing concern around the industry is the shrinking of the stablecoin market. 

CoinMarketCap data suggests the overall market capitalization held by all the available stablecoins across the crypto market, or stablecoin market cap, fell below 130 billion USD. Currently, the market cap is around 129.56 billion USD. It’s down for about 14 months now, as it was at similar levels in March last year. 

Noteworthy is the broader stablecoin landscape suffered through last year’s industry-wide crypto winter. Though the stable commodity-pegged digital asset space has stalled since September 2021, the crypto crash has worsened. 

The daily trading volume is over 32 billion USD, following an approximately 20% jump in the last 24 hours. However, the monthly trading volumes have recorded their lowest state in the previous couple of years. Data suggests monthly trading volume to hit 292 billion USD, the lowest since 2020. 

Shrinking of stablecoin universe value indicates liquidity draining within the space. The crypto assets serve the motive of facilitating easy crypto trading. Both buying and selling of cryptocurrency are carried with them. 

They facilitate crypto users to keep their funds within the crypto space, eliminating the expected volatility and value loss issues. Potential reasons behind the degrading of stablecoins’ value could be a decline in issuers’ reserves or the increasing lack of trust among users. 

The entities behind the stablecoins manage to keep the reserves to back the token supply. Reduction of the token baking reserve might result in the depreciation of digital assets. 

On the other hand, the fear within the crypto market leads investors to pull out their money. In a liquidity crunch, the stablecoin directly depends upon the fiat reserves, losing overall value. 

Stablecoin is meant to peg its value with fiat currencies or specific stable commodities in 1:1. In case of disbalance in the ratio given any reason, it affects the digital asset price or its circulation, causing a decline in its dominance. 

The internal disparity among the stablecoins within the space is also evident. For instance, the leading stablecoin Tether (USDT) and USD Coin (USDC) hold significant contrast in their market capitalization. The former stands at a robust 83 billion USD market cap, over 60% of the stablecoin universe’s value. At the same time, USDC is at approx 29 billion USD. Both the top stablecoins have striking differences of more than 280%. 

Latest posts by Ritika Sharma (see all)

Source: https://www.thecoinrepublic.com/2023/05/26/stablecoin-market-cap-and-trading-volume-continues-to-decline/