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Stablecoin market cap and trading volumes fall while Tether gains market share
Title: Stablecoins on the decline: Fitch report shows that total supply is falling Is the age of stablecoins already over? A recent report from Fitch suggests that stablecoin volume is declining and the sector's overall market capitalization has also dropped significantly. According to data from The Block Crypto Data dashboard, the total stablecoin supply fell from $138 billion at the start of the year to $124 billion on July 3. The numbers speak for themselves: the average daily trading volume of the top 10 stablecoins fell from $53 billion in March to $28 billion in May. This decline could indicate that...
Stablecoin market cap and trading volumes fall while Tether gains market share
Title: Stablecoins on the decline: Fitch report shows total supply falling
Is the age of stablecoins already over? A recent report from Fitch suggests that stablecoin volume is declining and the sector's overall market capitalization has also dropped significantly. According to data from The Block Crypto Data dashboard, the total stablecoin supply fell from $138 billion at the start of the year to $124 billion on July 3.
The numbers speak for themselves: the average daily trading volume of the top 10 stablecoins fell from $53 billion in March to $28 billion in May. This decline could indicate that investors are increasingly turning away from stablecoins. But Fitch points out that stablecoins still offer better liquidity support than other cryptocurrencies.
It is important to note that stablecoins are usually pegged to fiat currencies, particularly the US dollar. However, they are not exclusively covered by one asset. The underlying reserves can consist of different types of assets, including cryptocurrencies, gold, oil or algorithmic stablecoins.
Despite this trend, Tether’s USDT has recently grabbed market share from its rival stablecoins. Especially after the USDC incident in March, coverage of Tether has expanded significantly. What is interesting is that the composition of Tether's reserves has changed. The share of commercial paper and repos increased to 65% and 10% of reserves, respectively, by the end of the first quarter of 2023.
Another interesting aspect of Fitch's report relates to Binance and the stablecoin BUSD. Binance increases liquidity for BUSD by collateralizing repurchased securities in its portfolio with long-term, flexible bonds. These bonds can be terminated daily and thus contribute to the improved liquidity of the stablecoin.
Overall, Fitch’s report shows that stablecoin volume and the sector’s overall market capitalization are declining. It remains to be seen whether this trend will continue or whether demand for stablecoins will increase again in the future. The combination of fiat currencies and other assets continues to make this type of cryptocurrencies attractive, especially due to their better liquidity support.