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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Domino Effect On Stablecoins Leads To Reversal Of Growth Trend

Best Owie
Best Owie
1 year ago
3 mins read
stablecoins

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Created by industry experts and meticulously reviewed
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The crypto bear market of 2022 has spared no digital asset in the space, and stablecoins have been no different. The assets which have always served as a safe haven for investors when it comes to the high volatility of the crypto market had seen a drawdown coming into the new year. As a result of this, for the first time, these stablecoins are now seeing a reversal of their otherwise bullish growth trend over the last couple of years.

Stablecoins See Market Cap Plummet

Stablecoins had grown tremendously throughout the bull market of 2021. By the end of the year, the year-over-year growth of the stablecoin market cap had actually come out to a total of $151.3 billion. This growth is attributed to the popularity among investors who were holding their funds in stablecoins, either from profits or waiting to buy more cryptocurrencies.

Related Reading | Bitcoin Dominance Dives As Ethereum Takes Up More Space

The top stablecoins had enjoyed most of this growth. Assets such as USDT and USDC saw their market caps grow by double-digits in billions, although they continued to fiercely compete with one another. This competition would, however, come out in the favor of USDC. Most of the support had sprung from the fact that USDC had more regulatory oversight compared to USDT, whose reserves continue to be questioned even to this day.

The year 2022 would prove to not be a good one for USDT too. It had come into the new year with more than $78 billion. But in the first half of the year alone, it has lost more than $12 billion to be sitting at its current market of a little over $66 billion at the time of this writing.

Stablecoins growth

Stablecoin supply drops | Source: Arcane Research

USDC, on the other hand, is enjoying much success even through the bear market. Its market cap has added more than $10 billion this year alone, growing from $42.2 billion to $55.31 billion at the time of this writing. 

The Crash Of UST

A major factor behind the decline in the stablecoin market cap has been the crash of UST. By the beginning of this year, it was the largest and most popular algorithmic stablecoin, which is why the crash shook the market to the extent that it did.

Related Reading | Ethereum Classic (ETC) Reclaims $3 Billion Market Cap, More Upside To Follow?

Since then, the market cap of algorithmic stablecoins has dropped from $13.26 billion to around $3 billion. UST alone accounted for more than 94% of the decline after the crash, wiping off $9.7 billion from the crash. There was the crash of other algorithmic stablecoins such as DEI, but UST’s popularity and size made it the most prominent.

USDT market cap chart from TradingView.com

USDT market cap drops to $66B | Source: Market Cap USDT on TradingView.com

This has understandably led to reluctance on the part of crypto investors when it comes to using algorithmic stablecoins. As such, stablecoins such as USDT, USDC, and BUSD continue cot rule the market. However, the total stablecoin supply has been down 35.8% over the last six months. This can be regarded as a good thing, given that an increase in supply can often lead to a decline in value and vice versa.

Featured image from TRT World, charts from Arcane Research and TradingView.com

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Best Owie
Best Owie

Best Owie

Best Owie is a seasoned managing editor with a wealth of experience currently serving as the Managing Editor at NewsBTC. Best is a highly skilled professional with a track record of producing engaging and informative content. With a keen eye for detail and a passion for accuracy, Best is committed to ensuring that each article published meets the highest standards of quality.

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Best has over six years of experience in the crypto industry and has overseen the creation and publishing of thousands of articles over the years. Best is always abreast of everything that is going on in the crypto industry in order to create and curate the most relevant content for readers. This shines through in Best’s publications, which are always clear and concise, enabling easy reading and understanding for all.

Best is also an avid learner and advocate for new technology. This has seen Best dive into topics in areas such as decentralized finance (DeFi), non-fungible tokens (NFTs), Layer 2 blockchains, etc. In addition to this, Best is a vocal member of the crypto community across various social media platforms such as X and Reddit. Best’s work garners tens of thousands of readers monthly, who rely on the information in these publications to keep up-to-date with everything happening in the crypto community.

Best’s articles explore breaking news, intricate systems such as yield farming, liquidity pools, and other decentralized finance (DeFi) systems. This is because Best understands the importance of information to gaining financial freedom and believes that everyone should have access to this information.

Best also believes in leveraging the blockchain for philanthropy to create the most positive social impact. This involves work with charitable organizations focused on financial literacy and education. With each article, Best lends a voice to important issues such as a more financially inclusive future, transparent systems for growth and development, and technology that is not self-serving but one that serves all of humanity.

When not curating engaging content, Best can be found reading a book with a cup of hot chocolate, enjoying a Netflix series, or exploring the outdoors with Green - the world’s most quiet and well-behaved Husky. Best’s interests also span other industries such as art, finance, and security, attending seminars and conferences in not just the crypto industry but other industries as well.

As an animal lover, Best is also involved with charities for animals, local shelters, and rescues. Best is also involved in local events that promote inclusivity, such as being a prominent member of hiking clubs and a cycling club, as well as being a part of a very happy group of animal lovers.

Best is a true professional in every sense of the word, with an exceptional dedication to producing high-quality work. This shines through in Best's work on and off the clock. These include advocating for inclusive crypto education for all, the impact of financial illiteracy, and the benefits of adopting new technologies such as cryptocurrencies. Best’s prolific career in the media industry is a testament of how hard work and dedication pays.

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Reason to trust

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Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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