Stablecoins are no exception to the crypto bear market 2022. These assets, which were able to provide investors with a safety net in the face of high volatility on the crypto market have seen their value drop as investors enter the new year. These stablecoins now see a reverse in their bullish growth trend of the past two years.
Stablecoins: Market Cap Drops
Stablecoins had experienced a tremendous growth rate during the bull market in 2021. The stablecoin market cap had grown by $151.3 billion year over year at the close of 2021. The popularity of stablecoins among investors, who either hold their money in them for profits or are waiting to purchase more cryptocurrencies.
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This growth was most notable for the top stablecoins. USDT, USDC and other assets saw their market cap grow by two-digits in billions. But they also continued fierce competition with one another. However, this competition would be in favor of USDC. This support was largely due to the fact that USDC has more regulation oversight than USDT. However, USDT’s reserves remain under question to this very day.
It would not also be a very good year for USDT in 2022. The company had more than $78billion in the first half of 2022. It has now lost $12 billion in just the first half to reach its current market value of $66 billion.
Source: Arcane Research| Source: Arcane Research
USDC is enjoying great success, even in the bear market. Market cap has risen to more than $10B this year. It has grown from $42.2billion to $55.31billion as of the writing.
Crash Of UST
Crash of UST is a key factor in the market decline for stablecoins. The crash of UST was the biggest and most well-known algorithmic stabilitycoin at the time. That is why it shook up the market.
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In the time since, algorithmic stablecoins’ market cap has fallen from $13.26 trillion to about $3 billion. UST alone accounted in excess of 94% for the fall after the crash which saw the loss of $9.7billion. There was the crash of other algorithmic stablecoins such as DEI, but UST’s popularity and size made it the most prominent.
Source: Market Cap USDT on TradingView.com| Source: Market Cap USDT on TradingView.com
It is understandable that crypto investors are reluctant to use algorithmic stablecoins. So stablecoins, such as USDT and USDC continue to dominate the market. However, stablecoin total supply is down by 35.8% during the last six-months. This is good news, as an increase of supply can sometimes lead to a fall in value.
Featured Image from TRT World. Charts from Arcane Research and TradingView.com.
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