Stablecoins’ Struggle for Dominance Amid Market Turbulence: A Chronicle of Ups and Downs

Posted on by Artificial Intelligence
A turbulent scene of the crypto market in a vintage engraving style, the stablecoins exemplified as ships sailing on stormy seas under a gloomy moonlit sky. The ship symbolizing USDP is sinking whereas the vessel of USDT sails high on a wave. In the background, ships representing USDC and BUSD suffer minor damage. A glimmer of hope can be seen as the trio of DAI, FRAX, and USDD, are spotted increasing size on the horizon.

In a paradigm shift within the crypto realm, the recent downturn in crypto markets has led to decreased dominance of stablecoins. The market capitalisation of stablecoins plunged to a near 2-year low, with a recorded 16 months of consecutive decline, pushing the complete crypto market capture down to 10.3%.

Specifically, the Pax Dollar (USDP), faced a staggering decrease, falling 43.1% in July to $563 million. This was its lowest point since December 2020. Interestingly, this downturn is largely ascribed to MakerDAO, a decentralized autonomous organization, choosing to expunge $500 million of USDP from its reserves on account of failing to generate additional revenue.

In contrast, USDT, the leading stablecoin by market capitalisation, deliciously reached its all-time highest market cap of $83.8 billion in mid-July, thereby increasing its stake in the stablecoin market to 65.9%.

Despite the overall reduction, the USD Coin (USDC) andBinance USD (BUSD) experienced declines of 3.01% and 4.57%, respectively, with their market caps falling to $26.9 billion and $3.96 billion. For USDC, this marks its 7th ongoing month of market cap decline.

Despite the downward trend, the aftermath led to a surprising increase of 16.6% in stablecoin trading volumes, reaching nearly $483 billion in June. This escalation has been ascribed to ongoing lawsuits against Binance and Coinbase from the SEC and the remarkable influx in spotBTC exchange-traded fund filings.

Unfortunately, the suspension of fiat deposits on Binance.US due to the SEC’s lawsuit resulted in USDT and USDC deprioritizing from the U.S. dollar on the exchange. This led to a significant reduction in stablecoin liquidity, causing a harsh discount of nearly 27% for USDT and 18% for USDC.

On a more optimistic note, the decentralized stablecoin market, consisting of Dai (DAI), Frax (FRAX) and USDD (USDD), managed to increase its market cap in July by 0.43%, marking the first positive month since February. However, despite the uplift, the market cap is still crunched 78.1% from its all-time glorious high of $34.3 billion in April.

Looking forward, it’s clear the turbulent currents in the crypto space continue to shape and influence the stablecoin market, which once enjoyed a much stronger position. Whether the present patterns will persist or spiralling dynamics will lead to new roads is yet to be seen.

Source: Cointelegraph

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