The combined market capitalization of major stablecoins fell from around $166 billion in March 2022 to $122 billion in September 2023, according to data from RWA.xyz – a drop of more than 26% as investors withdrew money from the digital asset market.
Tether’s USDT fell from $78 billion to $65 billion between March and November 2022. For USDC, the downward trend took much longer to manifest, falling from $55 billion in July 2022 to less than $24 billion in November 2023, exacerbated by the collapse of its banking partner, Silicon Valley Bank, in March 2023.
The implosion of TerraUSD, the algorithmic stablecoin of crypto project Terra-Luna, also wiped $18 billion from the stablecoin market.
The current decline is just a temporary setback in a long-term uptrend, one analyst said.
“The recent drop in stablecoin market capitalization represents a relatively small setback in what we believe to be a long-term growth market,” said Paul Howard, senior director at trading firm Wincent.
“Short-term fluctuations in liquidity are normal, but they do not change our view that stablecoins will continue to play an increasingly important role in the digital asset ecosystem,” he added.
Growing stablecoin competition
Beyond the overall decline, the trend seems more nuanced.
Part of the slowdown reflects a changing competitive landscape. As stablecoins move beyond cryptocurrency trading and into traditional payments, new issuers have entered the market following regulatory advancements such as the GENIUS Act in the United States.
