The total market capitalization of stablecoins fell 0.45% to $130 billion as of May 23, the lowest stablecoins market cap since September 2021 and the fourteenth consecutive month of decline.
According to CCData’s latest Stablecoins & CBDCs report, the contraction of the stablecoin market has been ongoing since March 2022. Stablecoins are digital currencies that attempt to offer investors price stability through a mechanism that allows them to remain pegged to the value of a specific asset
Most stablecoins, including leading ones USDT and USDC, are pegged to the value of the U.S. dollar by backing each token 1:1 with cash or cash equivalents in reserves.
Analysts highlight this stablecoin market contraction is of particular concern as it portends potential liquidity issues for the broader crypto market. Banking powerhouse JPMorgan stated in a report last week that until the stablecoin market ceases its contraction, a sustained recovery in cryptocurrency prices remains unlikely.
Similarly, an earlier report from global investment bank Goldman Sachs equated the shrinkage of the stablecoin market to a form of quantitative tightening for the cryptocurrency market, hinting at declining liquidity and leverage.
Trading volume with stablecoins also fell significantly this month, dropping 40.6% to $460 billion on centralized exchanges, the lowest monthly volume since December 2022, per the CCData report.
TrueUSD (TUSD) has bucked the trend, with its trading volume surging to $29 billion this month, surpassing that of USDC and BUSD. Leading cryptocurrency exchange, Binance, has played a significant role in TUSD’s success, as it promoted it on its platform through zero-fee trading pairs.
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- Source: https://www.cryptocompare.com/email-updates/daily/2023/may/25/
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