Stablecoin Market Capitalization Hits Its Lowest Level Since August 2021

Stablecoin Market Capitalization Hits Its Lowest Level Since August 2021

Overview of the Decline in Stablecoin Market Cap

The market capitalization of stablecoins has plunged to its lowest level since August 2021, witnessing a continuous decrease for the past 16 months, according to a recent report. Crypto analytics firm, CCData disclosed this in a report published on July 20, which shared the revelation that from the beginning of July till July 17, the stablecoin market cap observed a shrinkage of about 0.82%, bringing the sector’s market cap to a rounded figure of $127 billion.

Shift in Stablecoin Market Dominance

The report also indicated a marginal decline in the stablecoin market dominance, which now stands at 10.3% after dropping from 10.5% in June. Among the top ten stablecoins, Pax Dollar (USDP) has taken the hardest hit, with a massive 43.1% drop to $563 million in July, the lowest value recorded since December 2020.

Major Causes of the Descend

CCData attributes the sharp fall mainly to the decision taken by MakerDAO, the decentralized autonomous organization behind the Maker protocol, who chose to excise $500 million of USDP from its reserves due to its inability to generate extra income.

Market Cap of Top Stablecoins

However, Tether (USDT), leading the pack of stablecoins in terms of market cap, succeeded in hitting its highest-ever market cap of $83.8 billion as of July 17, thereby increasing its stablecoin market cap dominance to a whopping 65.9%.

Stablecoin Market Capitalization Hits Its Lowest Level Since August 2021

The USD Coin (USDC) and Binance USD (BUSD) saw their market cap fall by 3.01% and 4.57% to $26.9 billion and $3.96 billion, respectively. For USDC, this marks its seventh monthly market cap decline in a row, hitting a low point not encountered since June 2021.

Rise in Stablecoin Trading Volumes despite Market Cap Decline

Despite these continuous falls, stablecoin trading volumes experienced a 16.6% upswing to approximately $483 billion in June, the first observed monthly increment since March. CCData affirms that the surge in spot Bitcoin (BTC) exchange-traded fund applications and the lawsuits against Binance and Coinbase from the Securities and Exchange Commission (SEC) majorly contributed to last month’s increase in stablecoin trading volumes.

Effects of Suspension and Depreciation

Another pivotal event in June was the SEC’s lawsuit against Binance.US, leading to the stoppage of fiat deposits on the platform. This incident prompted USDT and USDC to depeg from the U.S. dollar on the exchange, says CCData.

Growth in Decentralized Stablecoin Market

The decentralized stablecoin market, which houses DAI (DAI), Frax (FRAX), and USDD (USDD), saw its market cap grow by 0.43% to $7.52 billion in July, the first increase recorded since February. Notably, it’s still down 78.1% from its peak at $34.3 billion in April.

Trigger for the Downward Trend

The downward trend was initially sparked by the implosion of the Terra Luna ecosystem and the near-total depeg of the algorithmic stablecoin TerraClassicUSD (USTC).