Throw Bitcoin! Stablecoins now make up 15% of the total crypto market
Stablecoins now rule the market, beating Bitcoin and Ethereum’s economies
This year, cryptocurrencies had a wild ride as Bitcoin and Ethereum fell over 70% since their all-time highs in November 2022. Earlier, experts said that the crypto market’s correlation with the stock market had worsened the state of the digital asset domain. The markets took a sharp turn in June, with major stablecoins also falling due to the unexpected volatility in the market. Also, a significant portion of the overall crypto market cap fell due to the recession, rising interest rates, and the growing involvement of crypto regulators and lawmakers. Nevertheless, people’s interest in crypto continues to be high. But their growing interest now surrounds stablecoins. Reports claim that stablecoins now account for nearly 15% of the total crypto market capitalization. The combined market capitalization of Tether, USD Coin and Binance USD has doubled this year, rising from 7% in January to 16% in December. Meanwhile, the biggest cryptocurrencies in the market, Bitcoin and Ethereum keep rejecting big price floors and pushing investors towards more losses. So, is it time for stablecoins to take over the market? Let’s dig deeper.
State of Stablecoins in Crypto Winter 2022
The recent market volatility is considered special for many reasons. Thanks to the headwinds of the recession, rising interest rates and the war in Ukraine, even some of the safest investments in the crypto market fell drastically. TerraUSD (UST) was one of the fastest growing stablecoins in the market and its catastrophic fall shook the entire market. UST lost almost 98% of its market value, slaughtering the gains made by Bitcoin and Ethereum over the past year. The massive implosion of TerraUSD also caused several other major cryptocurrencies such as Tether and BinanceUSD to lose their link to USD 1. This drastic change caused investors to flee the market as the likely safe investments in the market also turned out to be extremely volatile. In general, stablecoins are considered a worthy investment by new investors entering the market, and for low-risk crypto users, as mentioned earlier, stablecoins are considered the safest investment asset class in the markets. But the fall of stablecoins in 2022 shook the investment community, causing several investors to flee the market.
So, are Stablecoins good investment options right now?
Reports show that stablecoins had the biggest decline among cryptocurrencies. These cryptocurrencies have shown a lot of resistance to market volatility and have significantly increased their market share. Tether has doubled its market share by expanding it by 7.7% since the post-TerraUSD drop. The market value of the world’s second largest stablecoin USD Coin jumped from 1.9% to 5% in the same period. BUSD’s market share increased fourfold to 2.6%. Now together, these three stablecoins have accounted for 15.3% of the total crypto market value, showing an increased improvement in price movements.
In a nutshell, as the summer of 2022 brought forth the coldest lull for the crypto market, as we approach the end of the year, stablecoins are trying to restore the market’s lost prominence in the economic and financial markets. However, investors must still exercise extreme caution while handling these cryptocurrencies and should constantly seek the advice of financial consultants.
