- The total market cap of crypto stablecoins has decreased, reaching the weakest point since September 2021.
- Volume of trading with crypto stablecoins has experienced a whole lot of decline.
- The contraction of the crypto stablecoin market has signaled deteriorating liquidity.
In a disconcerting tendency for the recovery of digital currency prices, the crypto stablecoin market is poised to contract for the 14th consecutive 30 days, signaling a draining of financial resources from the digital investment space.
Digital investment data company CCData revealed in its recent market report that the total market cap of crypto stablecoins plummeted to $130 Billion in May, reaching its weakest point since September 2021.
This ongoing decline, which began in March 2022, reports by CCData, raises concerns about the liquidity of crypto stablecoins and its implications for the broader cryptocurrency ecosystem.
Trading Volume Plunges 40.6%, Lowest Since December 2022
The CCData report outlines a drastic 40.6 percent plunge in volume of trading with crypto stablecoins these 30 days, resulting in a mere $460 Billion volume on centralized exchanges. This marks the lowest monthly volume since December 2022.
The report implies that this decline in trading activity is aligned with major cryptocurrency assets remaining range-bound and failing to break through critical support and resistance levels.
Interestingly, amidst the overall market slump, TrueUSD (TUSD) crypto stablecoin has managed to defy the tendency, experiencing an boost in volume of trading to $29 Billion so far these 30 days, reports by CCData.
TUSD has surpassed its struggling competitors, USDC and BUSD, making it the Second most traded crypto stablecoin on centralized exchanges for the 1st time.
This resurgence can be attributed to Binance Crypto exchange, the world’s dominant cryptocurrency exchange, which has actively promoted the use of TUSD on its platform by waiving trading charges for buying and selling Bitcoin (BTC) using the stablecoin.
Crypto Stablecoin Market Must Stabilize for Cryptocurrency Prices to Recover
A recent report by banking behemoth JPMorgan highlighted that digital currency prices are unlikely to experience a sustained recovery until the crypto stablecoin market stabilizes.
Furthermore, a worldwide financing bank Goldman Sachs Group report earlier this year likened the decline in crypto stablecoins to quantitative tightening for the cryptocurrency market, indicating diminishing liquidity and leverage.
The other side
- Although while the crypto stablecoin market has been contracting for 14 consecutive months, it’s notable that the overall digital currency market has experienced whole lot of growth and adoption during the same period.
- The decrease in volume of trading with crypto stablecoins may be partially stated by market participants exploring alternative trading methods and decentralized exchanges, which offer different liquidity dynamics and trading mechanisms.
- TrueUSD’s recent success can potentially be attributed not only to promotional efforts by Binance Crypto exchange but likewise to the token’s unique features and advantages that have resonated with traders seeking alternatives to more established stablecoins.
Why This Matters
As a critical source of liquidity, crypto stablecoins play a critical role in facilitating digital currency trading and investment. The contraction of this market poses challenges for the recovery of digital currency prices, hindering sustained growth and highlighting the lingering effects of the bear market.
To learn more about the plummeting usage of USDT and its impact on the market, read here:
USDT Usage Plummets to 4-Year Low Regardless of Record Market Cap
To stay updated on the latest cryptocurrency and digital investment trends of 2023, as revealed in the Ripple report, read here:
Ripple’s Value Report Spotlights Key Trends in Cryptocurrency, Tokenization, and DeFi