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Stablecoin supply has been on a downward trajectory since the TerraUSD collapse in 2022. And despite the crypto market\u2019s bullish week, stablecoins remain flat.<\/p>\n
The stablecoin market cap stayed relatively steady at $124 billion during bitcoin\u2019s sudden upswing, failing to break the sector\u2019s levels from early September, according<\/a> to DeFiLlama.\u00a0<\/p>\n Analysts say stablecoin supply is a lagging indicator, but the lack of a stablecoin resurgence could indicate that bitcoin\u2019s bull run isn\u2019t driving new liquidity into the crypto market.<\/p>\n Stablecoins are tokens pegged to a certain asset or value, like the US dollar. Importantly, stablecoins are popular as on and off-ramps for investors.<\/p>\n \u201c[Stablecoins<\/a>] are, I would say, the ultimate transacting currency of crypto markets,\u201d Clara Medalie, head of research at Kaiko, said. \u201cRight now, the vast majority of every crypto trade is done with a stablecoin, especially as fiat on-ramps [come] under regulatory pressure.\u201d<\/p>\n The stablecoin market cap trended upwards until TerraUSD [UST]\u2019s collapse<\/a>. It has bled slowly ever since, down to today\u2019s figure of $124 billion from the high around $188 billion, according to DeFiLlama.\u00a0<\/p>\n A recent CoinGecko report<\/a> found that the top 15 stablecoins shed $4.8 billion in market cap in Q3, with USDCoin [USDC<\/a>] alone shrinking by $2.26 billion. Tether, which stayed flat in Q3, now makes up 67.86% of stablecoins\u2019 market cap, per DeFiLlama.<\/p>\n Vaidya Pallasena, head of ratings at stablecoin rating agency Bluechip, offered two explanations for the decoupling of bitcoin\u2019s [BTC<\/a>] price from the stablecoin market cap.<\/p>\n \u00a0\u201cFirst, a significant share of overall BTC trading volumes was executed through the CME, wherein trades are settled in cash, not stablecoins,\u201d Pallasena told Blockworks. \u201cSecond, BTC trading volumes on crypto exchanges also saw an uptick at the same time, but this has more to do with existing liquidity on exchanges\/wallets being deployed to gain exposure in anticipation of an ETF approval<\/a>, than with new retail participants entering the market.\u201d<\/p>\n Medalie said the stablecoin market cap is a lagging indicator, and it may take a couple of months to see whether the market is ready to resume moving funds into crypto.\u00a0<\/p>\n \u201cAn investor [is] not going to be like, \u2018Okay, markets are increasing, let me go issue 500 million tether.\u2019 They need more convincing price movements to be able to really reinvest in these markets,\u201d Medalie said.<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\n
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