The crypto bear market of 2022 has spared no digital assets in the space, and stablecoins are no different. When it comes to the high volatility of the crypto market, the asset has always acted as a safe haven for investors, which has seen a decline in the new year. As a result, for the first time, these stablecoins are now seeing a reversal of their otherwise bullish growth trend over the past few years.
Watch Stablecoins Market Cap Plummet
Stablecoins had a tremendous growth throughout the bull run of 2021. By the end of the year, the year-over-year growth of the stablecoin market cap had actually totaled $151.3 billion. This increase is attributed to the popularity among investors who held their funds in stablecoins, either out of profits or waiting to buy more cryptocurrencies.
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The top stablecoins enjoyed the most of this growth. Assets like USDT and USDC saw their market caps grow into the billions by double digits, although they continued to compete fiercely with each other. However, this competition will turn out in favor of USDC. Much of the support stemmed from the fact that USDC had more regulatory oversight than USDT, whose reserves are still being questioned today.
The year 2022 will also not prove to be good for USDT. It came in the new year with over $78 billion. But in the first half of the year alone, it has lost more than $12 billion to sit in its current market at a little over $66 billion at the time of this writing.
Stablecoin supply drops | Source: Arcane Research
USDC, on the other hand, is also having great success through the bear market. Its market cap has grown by more than $10 billion this year alone, rising from $42.2 billion to $55.31 billion at the time of this writing.
UST’s crash
A major factor behind the decline in the stablecoin market capitalization has been the collapse of the UST. Until earlier this year, it was the largest and most popular algorithmic stablecoin, which is why the crash shook the market to such an extent that it did.
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Since then, the market cap of algorithmic stablecoins has fallen from $13.26 billion to nearly $3 billion. UST alone accounted for more than 94% of the fall after the crash, having wiped out $9.7 billion from the crash. Other algorithmic stablecoins such as DEI crashed, but the popularity and size of UST made it the most prominent.
USDT market cap drops to $66B | Source: Market Cap USDT on TradingView.com
This causes reluctance on the part of crypto investors when it comes to using algorithmic stable coins. Therefore, stablecoins such as USDT, USDC and BUSD rule the market. However, the total stablecoin supply has declined by 35.8% over the past six months. This can be regarded as a good thing, given that an increase in supply can often lead to a fall in price and vice versa.
Featured image from TRT World, charts from Arcane Research and TradingView.com
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