Stablecoin dominance drops as market cap hits 2-year lows: CCData

Stablecoin dominance drops as market cap hits 2-year lows: CCData

The Decline of Stablecoin Market Capitalization: A Comprehensive Analysis

The blockchain industry has been closely monitoring the market capitalization of stablecoins, which has recently reached its lowest level since August 2021. According to a report released by cryptocurrency analytics platform CCData on July 20, the stablecoin market cap experienced a 0.82% decline from the beginning of the month until July 17, resulting in a total market cap of $127 billion. This decline in market capitalization comes after 16 consecutive months of decline, signaling a significant shift in the stablecoin sector.

The Current State of Stablecoins

While the stablecoin market dominance has experienced a slight fall and currently stands at 10.3%, down from 10.5% in June, it is worth noting that Tether (USDT), the largest stablecoin by market cap, reached its all-time high market cap of $83.8 billion as of July 17. This surge in market cap contributed to an increase in stablecoin market cap dominance, which now stands at 65.9%.

In contrast, the market cap of USD Coin (USDC) and Binance USD (BUSD) fell by 3.01% and 4.57%, respectively, resulting in market caps of $26.9 billion and $3.96 billion. Notably, this decline in market capitalization marks the seventh consecutive month of decline for USDC, reaching its lowest level since June 2021.

Pax Dollar (USDP), one of the top ten stablecoins, experienced the most significant decline, falling by 43.1% to $563 million in July. This decrease in market cap can be attributed to MakerDAO, a decentralized autonomous organization responsible for the Maker protocol. MakerDAO decided to remove $500 million of USDP from its reserves due to the failure to generate additional revenue.

To provide a visual representation of the stablecoin market, CCData’s report includes a graph displaying the market caps of various stablecoins. Most stablecoins have maintained relatively stable market caps since May, with the exception of USDP, which experienced a significant 43.1% decline.

Stablecoin Market Caps Most stablecoins market caps have remained relatively stable since May, except for USDP which has fallen 43.1%. Source: CCData.

Factors Influencing Stablecoin Trading Volumes

Despite the consecutive decline in stablecoin market capitalization, trading volumes have actually increased by 16.6% to approximately $483 billion in June. This marks the first monthly increase since March, indicating a potential shift in the stablecoin market.

CCData suggests that two significant events contributed to the increase in stablecoin trading volumes. Firstly, the lawsuits against Binance and Coinbase by the Securities and Exchange Commission (SEC) created a surge in spot Bitcoin (BTC) exchange-traded fund filings. This increased activity in the cryptocurrency market likely drove up stablecoin trading volumes.

Secondly, the suspension of fiat deposits on Binance.US due to the SEC’s lawsuit against the firm also had a considerable impact on stablecoin trading volumes. This led to USDT and USDC depegging from the U.S. dollar on the exchange, resulting in a drastic decline in liquidity and a discount of around 27% and 18% for USDT and USDC, respectively.

The Decentralized Stablecoin Market

In contrast to the overall decline in the stablecoin market, the decentralized stablecoin market experienced a slight increase in market capitalization. This market, which includes Dai (DAI), Frax (FRAX), and USDD (USDD), saw a 0.43% increase in market cap to reach $7.52 billion in July. While this is a positive development after a series of negative months since February, the market cap is still 78.1% lower than its all-time high of $34.3 billion in April.

The decline in the decentralized stablecoin market can be traced back to the collapse of the Terra Luna ecosystem and the depegging of the algorithmic stablecoin TerraClassicUSD (USTC), which led to a downward trend. However, the recent increase in market capitalization suggests a potential recovery for the decentralized stablecoin market.

Conclusion

The recent decline in stablecoin market capitalization, coupled with the increase in stablecoin trading volumes, has raised important questions about the stability and future of stablecoins. While Tether (USDT) continues to dominate the market, other stablecoins such as USD Coin (USDC) and Binance USD (BUSD) have experienced significant declines in market cap.

The influence of external factors, such as lawsuits and regulatory actions, on stablecoin trading volumes highlights the vulnerability of these assets to market dynamics. Additionally, the rise of decentralized stablecoins presents both challenges and opportunities for the industry, as demonstrated by the recent increase in market capitalization.

As the blockchain industry continues to evolve, it is crucial to closely monitor the trends and developments in the stablecoin market. With further research and analysis, stakeholders can gain valuable insights into the dynamics of stablecoins and make informed decisions in this rapidly changing landscape.

References:CCData’s Stablecoins & CBDCs ReportUnstablecoins: Depegging, bank runs and other risks loomAave Protocol launches stablecoin GHO on Ethereum mainnet, $2M minted

We will continue to update Phone&Auto; if you have any questions or suggestions, please contact us!

Share:

Was this article helpful?

93 out of 132 found this helpful

Discover more