Stablecoins Market Cap Continues To Slump – Here’s Why

Christian Encila

1 year ago

3 mins read

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Stablecoins are cryptocurrencies built to withstand the market’s volatility as it is backed by a specific asset. In the case of most stablecoins, the US dollar backs the cryptocurrency, pegging the coin’s value to one USD.

Investors use stablecoins regularly as a medium of exchange in both decentralized exchanges and centralized exchanges, providing them a quick way to carry out their trading activities.

However, a recent report by CryptoCompare shows that although investors still recognize the utility of stablecoins, their market capitalization has consistently dropped since hitting its peak back in April of 2022. This shows the market reacting negatively with recent external developments surrounding these asset types.

A Dash Of Pain And Sweet Developments

Just last week, Paxos, the issuer of Binance’s BUSD, was hit by charges by the Securities and Exchange Commission with the New York State Department of Financial Services ordering the company to stop the issuance of BUSD. This development deals a massive blow for investors and traders who are using these digital currencies as a means of transacting in the crypto space.

Going against the United States’ stance on stablecoins, governments around the world have been experimenting with the concept of CBDCs, or central bank digital currencies. These are a type of digital currencies issued by a governing body with the same legality and regulation as traditional fiat currencies.

Image: CoinGeek

However, with some losing dominance in the space, USDT, Tether’s official stable coin, has risen in its dominance in the space. The report shows that its dominance rose from 48.7% to 51.7%, being one of, if not, the most dominant in the space. This most recent change is attributed to the recent regulatory actions against BUSD.

Decentralized Stablecoins Take The Spotlight – Will They Gain Dominance?

The decline of stablecoins issued by centralized entities sets the spotlight on these decentralized currencies. CryptoCompare recorded a nearly 1% increase in decentralized stablecoin market cap, a continuance of a three-month long increase. However, the market share of decentralized stablecoins is currently at 6.38%, a long shot since the sector’s all-time high of 18.3%.

Issuers of decentralized stablecoins also experienced big gains with Curve showing a 36% increase in price. However, this recent event may not last for long as algorithmic stablecoins are facing regulatory scrutiny. With Canada banning algorithmic stablecoins, we might see the market share of decentralized stablecoins fall even more.

Crypto total market cap at $1 trillion on the daily chart | Chart: TradingView.com

The recent hawkish regulatory actions by government authorities might ramp up this year. However, with governments around the world looking upon stablecoins as a way to digitize fiat currency, stablecoin regulation might come sooner than we think.

-Image from Techiexpert.com

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.