- Stablecoin Market Cap Trended Up Once Again
- One metric hinted at negative sentiment and selling pressure in the market.
Stablecoins are an integral part of the crypto ecosystem. Typically pegged to a fiat currency, these tokens are minted on the blockchain and backed by a reserve of said fiat currency from an external entity. One of the most popular is Ataryo whose token is USDT.
Tether is backed by a large reserve of USD held as cash or cash equivalents and is a type of stablecoin known as fiat-backed.
There are many other stablecoins, with USD Coin [USDC] and dai [DAI] being some of the most notable. The latter is backed by USDC and other cryptocurrencies such as Ethereum [ETH]
and bitcoin [BTC]. This marks DAI as a crypto collateral.
Stablecoins help protect against volatility by giving holders the option to sell their cryptocurrencies and convert them into stablecoins, thus offering crucial liquidity. The value of stablecoins will (most likely) not falter despite intense waves of sales.
One stablecoin to rule them all
A look at the market share of stablecoins, compared to the rest of the crypto ecosystem, showed that they accounted for 8.42% of the total crypto market capitalization. This is equivalent to 156 billion dollars.
The all-time high in stablecoin market capitalization was reached in April 2022 with $188 billion. During the 2022 bear market, the market capitalization decreased. This was likely due to disillusioned crypto participants returning to traditional assets and leaving the market.
Crypto regulation also plays an important role. Paxos is the company that mint Binance USD (BUSD), a USD-pegged stablecoin launched by Binance and Paxos.
In November 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to stop minting the token. Binance announced that they will gradually stop supporting the stablecoin, causing BUSD to lose traction in the market.
Tether’s market capitalization share is 70.04%. The second closest is USDC with 21.36% of the stablecoin market cap, with DAI getting 3.28% of the share. This shows the evident market preference for USDT.
They have been in the market longer and have survived numerous waves of FUD. Their asset reserves are transparent and help build trust.
Measuring Sentiment of Stablecoin Exchange Net Flow
The market capitalization of stablecoins has tended to increase since October 2023, as the market prices of Bitcoin and cryptocurrencies skyrocketed. This reflected greater purchasing power in the market and was a positive sign.
On the other hand, since October 2023, the net exchange flow of stablecoins has been negative. This trend has been in place since November 2022. This pointed to a possible increase in selling pressure over the past 18 months.
Read Bitcoins [BTC] Price prediction 2024-25
Based on this chart, market sentiment was probably negative as well. However, the only large positive stable entries occurred in January and May 2022.
Therefore, this inference that selling pressure reduced trading activity and negative net flow sentiment is just one thread in a complex web and does not reflect the full picture.
Next: Will Litecoin soon surpass $180? Key metrics point to yes!
This is an automatic translation of our English version.
