The contraction of the cryptoย stablecoin market impliesย that the cryptocurrencyย market isย still in its bear phase, macro analyst Tom Dunleavy said.
The cryptoย stablecoin market is on track to shrink for the 14th consecutive 30ย days, a sign of financialย resources draining from the digital investment space, and a troubling tendency for the recovery of digitalย currency prices.
The total marketย cap of cryptoย stablecoins dropped to $130 Billion in May, sliding to the weakestย point since September 2021, digital investment data company CCData noted Tuesday in a market report. The cryptoย stablecoin market has been in a continuous decline since March 2022, per CCData.
Cryptoย Stablecoins are a subset of digitalย currencies that peg their price to an external investment, predominantly to the Unitedย States dollar. They are key plumbing for the digital investment universe, playing a critical role in facilitating digitalย currency trading and bridging government- announced fiat currencies with blockchain-based markets.
Analysts argue that the contraction of the cryptoย stablecoin market poses headwinds for digitalย currency prices, as it indicates deteriorating liquidity.
โ Cryptoย Stablecoins are the liquidity of the cryptocurrency ecologicalย system. The more liquidity, the more capacity for financing and speculation,โ Tom Dunleavy, macro analyst stated in a note to CoinDesk. โThe continued reduction, regardlessย of the growing number of applications, reveals to me we are still not out of the woods for this secular bear market.โ
Banking giant JPMorgan wrote pastย week in a report that digitalย currency prices are unlikely to enjoy a sustained recovery until the cryptoย stablecoin market stops shrinking. A report from worldwide financing bank Goldmanย Sachsย Group stated earlier this year that the cryptoย stablecoin shrinkage is equivalent to a sort of quantitative tightening for the cryptocurrency market, an indication of declining liquidity and leverage.
Trading with cryptoย stablecoins likewise plummeted 40.6 percent theseย 30ย days to $460 Billion in volume on centralized exchanges, reportsย by the CCData report. This is the lowest monthly volume since December 2022.
โThe fall in volumeย ofย trading comes with major cryptocurrency assets remaining range-bound and failing to break key support and resistance levels,โ the report said.
TrueUSD (TUSD) cryptoย stablecoin has defied the market-wide slump, with its volumeย ofย trading increasing to $29 Billion so far theseย 30ย days, per CCData. TUSD has overtaken USDC and BUSD, two struggling competitors, making it the Second most traded cryptoย stablecoin on centralized exchanges for the 1st time.
TUSD resurgence stems from Binanceย Cryptoย exchange, the worldโs dominant cryptocurrency exchange by volumeย ofย trading, promoting the tokenโs use on the platform by waiving trading charges for buying and selling Bitcoinย (BTC) (BTC) with it.
James Rubin.
