According to statistics from DefiLlama, the collapse of Terraform last year and the consequent decline of its native Terra USD (UST) stablecoin set off a series of events that reduced the worth of the stablecoin industry from $189 billion in May 2022 to a meagre $123 billion at today.
Analysts claim that stablecoin trade volumes have also been declining, plunging from a height of $150–300 billion to as little as $50 billion on a daily basis.
Some, like Vaidya Pallasena, co-founder of Bluechip, blame this decline on a number of causes, such as the increase in U.S. Treasury rates since the middle of 2022, which made it harder to defend the high opportunity cost of stablecoin ownership. Others, like as Nic Carter of Castle Island Ventures, blamed the reason on traditional finance rates surpassing cryptocurrency profits.
Stablecoin Market Shrinks by 35% Following Terra’s Troubles,Stablecoin Market Shrinks by 35% Following Terra’s Troubles
95% of the stablecoin market’s value, according to DefiLlama statistics, is centred around a small number of assets, including Tether (USDT), USD Coin (USDC), Dai (DAI), True USD (TUSD), and Binance USD (BUSD).
Notwithstanding depegging worries from earlier in the year, USDT commands a market capitalization of $83 billion and 67% of the volume in the stablecoin industry. However, even after Coinbase acquired a small interest in the stablecoin, USDC has taken a serious hit and fallen to multi-year lows.
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Stablecoins represent up to 80% of all blockchain settlement activity, but making up just 10% of the whole market share of the cryptocurrency business. This makes them crucial to the ecosystem of digital assets.
U.S. regulatory initiatives have likewise not benefited the dollar-pegged cryptocurrencies. The New York State Department of Financial Services (NYDFS) ordered Paxos to cease issuing new BUSD coins earlier in the year after BUSD was found to have broken investor protection rules.
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BUSD, which had a market capitalization of more than $16 billion and was the third-largest stablecoin after USDT and USDC, is currently ranked fifth with a $2.2 billion valuation, according to DefiLlama.
Stablecoin Market Shrinks by 35% Following Terra’s Troubles,Stablecoin Market Shrinks by 35% Following Terra’s Troubles,Stablecoin Market Shrinks by 35% Following Terra’s Troubles