While the global cryptocurrency market has observed a significant increase, registering a rise of 41.77% since the start of this year and accumulating a total value of $1.17 trillion, the stablecoin sector presents a contrasting story.
It has seen a noticeable contraction of $7.3 billion within a 140-day period, shedding light on an unexpected trend in an otherwise burgeoning crypto economy.
The Ebb and Flow of Stablecoin Value
Data emerging in 2023 reveals a decline of $7.3 billion in the stablecoin economy. Records from early January showed the value of the stablecoin market at a robust $138.12 billion.
Fast forward to the present day, and this figure has significantly reduced to $130.79 billion. This decrease can largely be attributed to multiple large-scale stablecoin projects experiencing significant redemptions within the past four months.
USDC, for example, has seen over $14 billion in redemptions, and BUSD has not been immune to this trend either, having suffered more than $11 billion in redemptions.
DAI has also felt the impact with redemptions mounting to $361 million. Despite this downward trend in USDC and BUSD, other stablecoin projects have demonstrated growth and managed to offset some of these losses.
TUSD has seen a rise from its market capitalization of $846.57 million at the start of the year to its current value of $2.04 billion. This indicates an impressive growth rate of 140.97%.
Similarly, Tether (USDT) has shown a significant surge from $66.29 billion in early January to its present worth of $82.95 billion, marking a 25% increase.
Examining the Future of Stablecoins amid De-dollarization
Despite the decline, the stablecoin market still represents a sizeable portion of the overall crypto economy. The $10.77 billion worth of stablecoin trades recorded on May 21, 2023, accounts for 57.9% of the total 24-hour trading volume in the entire crypto market.
However, this is a drop from the beginning of the year, when the stablecoin economy’s 24-hour trade volume was $27.11 billion, comprising 81.36% of the day’s global trade volume.
As the world continues to observe the diminishing role of the U.S. dollar as the global reserve currency, it brings into question the future of the stablecoin market.
The International Monetary Fund’s data shows that the U.S. dollar now constitutes just over 58% of global foreign exchange reserves, a significant drop from its 71% share in 2001.
Jeremy Allaire, the CEO of USD Coin (USDC) issuer Circle, expressed his concerns about this “very active de-dollarization” during the Consensus 2023 conference.
He stated that to remain competitive, the U.S. must digitize its currency and enforce stablecoin legislation. Countries like Russia and China are already taking steps toward de-dollarization, looking to replace the U.S. dollar with digital assets, other fiat currencies, or even a potential BRICS currency.
Such trends are evident in China, where the yuan has recently surpassed the U.S. dollar as the country’s most-used cross-border currency. This increased usage marks a stark contrast from 2010, when the yuan was used in nearly 0% of transactions.
A further example can be seen in El Salvador, which, in 2021, became the first country to officially use Bitcoin as a legal tender. As the process of de-dollarization continues to gain momentum, the stablecoin market’s future trajectory remains a subject of keen interest.
