Stablecoins Volume Down Despite Crypto Market Recovery, Ratings Agency Finds

Christian Encila

Last Updated: July 5, 2023 8:50 am

3 mins read

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Stablecoins, the digital assets designed to maintain a stable value, have long been viewed as a potential bridge between the cryptocurrency world and the traditional financial industry. However, recent developments have cast a shadow of uncertainty over their perceived stability.

As global policymakers continue to grapple with concerns about the crypto sector’s impact on the established financial system, a surprising twist occurred when stress in the US banking industry reverberated throughout the stablecoin market.

According to Fitch Ratings, the tightening of financial conditions, culminating in the high-profile failures of several banks, notably including the collapse of the esteemed Silicon Valley Bank, had a profound impact on stablecoins.

Stablecoins: Market Shakeup

For instance, Fitch Ratings reports that the market capitalization of USD Coin (USDC), a stablecoin pegged to the US dollar at a 1:1 ratio, experienced a sharp decline of over 25% in the first quarter. Although the coin’s value remains depressed, Fitch noted that it managed to recover its peg soon after.

According to data from The Block, the total supply of stablecoins has decreased from $138 billion at the beginning of the year to $124 billion as of July 3. This decline in supply further underscores the challenges faced by stablecoins and their struggle to maintain stability amidst market turbulence.

Chart: The Block Crypto Data

“Significant volatility, shaken investor confidence, and temporary but sharp de-pegging occurred in the stablecoin market in March as shockwaves spread from traditional finance,” Fitch wrote.

Tether Bucks Trend

In contrast to USDC, Tether, another prominent stablecoin, observed a 12% increase in its market capitalization during the same period. Notably, Tether captured approximately 72% of USDC’s redemption volume, indicating a growing preference for Tether among investors.

Despite Tether’s positive performance, the top 10 stablecoins experienced a decline in their monthly average of daily trading volumes. From March to May 2023, these trading volumes decreased from $53 billion to $28 billion.

This reduction signifies a decrease in activity within the stablecoin market, possibly driven by cautious investor sentiment in the face of ongoing market uncertainties.

Bitcoin approaches the $31K territory on the daily chart: TradingView.com

Fitch noted that efforts to regulate stablecoins have been unfolding at varying speeds in the United States and Europe, leading to notable differences in the reporting and transparency standards of these digital assets.

The contrasting approaches taken by the two regions have resulted in distinct regulatory landscapes for stablecoins, causing direct consequences on their reporting and transparency practices.

(The information provided on this website should not be interpreted as investment advice. Investing carries inherent risks, and when you make investments, there is a possibility of experiencing capital loss due to these risks).

Featured image from Zebpay

Christian Encila

They say journalists never truly clock out. But for Christian, that's not just a metaphor, it's a lifestyle. By day, he navigates the ever-shifting tides of the cryptocurrency market, wielding words like a seasoned editor and crafting articles that decipher the jargon for the masses. When the PC goes on hibernate mode, however, his pursuits take a more mechanical (and sometimes philosophical) turn.

Christian's journey with the written word began long before the age of Bitcoin. In the hallowed halls of academia, he honed his craft as a feature writer for his college paper. This early love for storytelling paved the way for a successful stint as an editor at a data engineering firm, where his first-month essay win funded a months-long supply of doggie and kitty treats – a testament to his dedication to his furry companions (more on that later).

Christian then roamed the world of journalism, working at newspapers in Canada and even South Korea. He finally settled down at a local news giant in his hometown in the Philippines for a decade, becoming a total news junkie. But then, something new caught his eye: cryptocurrency. It was like a treasure hunt mixed with storytelling - right up his alley!

So, he landed a killer gig at NewsBTC, where he's one of the go-to guys for all things crypto. He breaks down this confusing stuff into bite-sized pieces, making it easy for anyone to understand (he salutes his management team for teaching him this skill).

Think Christian's all work and no play? Not a chance! When he's not at his computer, you'll find him indulging his passion for motorbikes. A true gearhead, Christian loves tinkering with his bike and savoring the joy of the open road on his 320-cc Yamaha R3. Once a speed demon who hit 120mph (a feat he vowed never to repeat), he now prefers leisurely rides along the coast, enjoying the wind in his thinning hair.

Speaking of chill, Christian's got a crew of furry friends waiting for him at home. Two cats and a dog. He swears cats are way smarter than dogs (sorry, Grizzly), but he adores them all anyway. Apparently, watching his pets just chillin’ helps him analyze and write meticulously formatted articles even better.

Here's the thing about this guy: He works a lot, but he keeps himself fueled by enough coffee to make it through the day - and some seriously delicious (Filipino) food. He says a delectable meal is the secret ingredient to a killer article. And after a long day of crypto crusading, he unwinds with some rum (mixed with milk) while watching slapstick movies.

Looking ahead, Christian sees a bright future with NewsBTC. He says he sees himself privileged to be part of an awesome organization, sharing his expertise and passion with a community he values, and fellow editors - and bosses - he deeply respects.

So, the next time you tread into the world of cryptocurrency, remember the man behind the words – the crypto crusader, the grease monkey, and the feline philosopher, all rolled into one.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.