Decline in Stablecoin Market Capitalization Over 18 Months: Analysis and Impact on the Cryptocurrency Market
Date: 2023-09-22 Author: Dima Zakharov Categories: CRYPTO PAYMENTS
Since late August, the market capitalization of stablecoins has continued to decline, reflecting waning interest in this class of cryptocurrencies. This trend has persisted for 18 consecutive months, influenced by several factors affecting both trading activity and the overall perception of stablecoins within the cryptocurrency ecosystem.
Reduced Trading Activity and Market Capitalization
September proved to be a pivotal month for stablecoins. The combined market capitalization of all stablecoins in circulation decreased by 0.63%, reaching its lowest point since August 2021, at $124 billion. This represents only 11.6% of the total cryptocurrency market capitalization.
This decline in capitalization underscores the shift in investor and trader interests in a bear market environment. However, despite the decrease, stablecoins continue to play a crucial role in the cryptocurrency ecosystem.
Performance of Major Stablecoins
Among the top ten stablecoins, TetherUSD (USDT), DAI, and FDUSD managed to increase their market capitalization. FDUSD, issued by First Digital, demonstrated particularly impressive growth with a 21.5% increase, reaching $394 million in capitalization. This propelled the stablecoin to the ninth position by market capitalization.
Meanwhile, stablecoins BinanceUSD (BUSD) and FRAX experienced significant losses, decreasing by 19.2% and 16.7%, respectively. FRAX, with a capitalization of $670 million, slipped to the seventh position.
Outlook for BUSD and the Impact of the SEC
Stablecoin BinanceUSD (BUSD) has also encountered substantial difficulties. Its current capitalization stands at $2.49 billion, ranking fifth among stablecoins. However, Binance exchange plans to withdraw support for BUSD by February 2024, leading to a rapid decline in its position. Additionally, Paxos, the issuer of BUSD, faced claims from the U.S. Securities and Exchange Commission (SEC), resulting in the suspension of its issuance in February of the current year.
A New Player in the Field: PYUSD by PayPal
A significant development in the market has been the rapid growth of PYUSD, a stablecoin issued by PayPal. Despite the overall market downturn, PYUSD's capitalization surged by 87.9%, reaching $8.46 million as of September 18. This growth was driven by active listings on centralized exchanges.
In September, trading volumes in pairs with PYUSD significantly increased, reaching $9.29 million, marking over a fourfold increase compared to August. Huobi played a crucial role in this growth by listing PYUSD on September 7th.
