Crypto Collapse: Stablecoin Dominance Slides to Near 2-Year Lows

Stablecoin Market Cap Hits Lowest Level Since August 2021

Cryptocurrency analytics platform CCData released a report on July 20, which revealed that the market capitalization of stablecoins has hit the lowest level since August 2021. This comes after 16 consecutive months of decline.

The report stated that the stablecoin market cap fell by 0.82% from the start of the month until July 17, bringing the sector’s market cap to $127 billion. As a result, stablecoin market dominance decreased slightly, falling from 10.5% in June to 10.3%.

Out of the top ten stablecoins, Pax Dollar (USDP) was the most affected, dropping by 43.1% to $563 million in July — its lowest figure since December 2020.

Stablecoin Market Cap and Trading Volumes

The Maker protocol’s decision to remove $500 million from its reserves caused a significant fall in the market cap of USDP, but Tether (USDT) managed to reach its all-time high market cap of $83.8 billion on July 17, increasing its stablecoin market cap dominance to 65.9%.

Conversely, USDC and Binance USD (BUSD) experienced a dip of 3.01% and 4.57% to $26.9 billion and $3.96 billion, respectively. This marks USDC’s seventh consecutive month of decline and its lowest market cap since June 2021.

Despite the consecutive falls, the crypto luna classic trading volumes of stablecoins rose 16.6% to about $483 billion in June, making it the first monthly increase since March.

SEC Lawsuits and Stablecoin Trading Volumes

The Securities and Exchange Commission (SEC) lawsuits against Binance and Coinbase, as well as the surge in spot Bitcoin (BTC) exchange-traded fund filings, likely contributed to the increase in stablecoin trading volumes in June. Additionally, the suspension of fiat deposits on Binance.US due to the SEC’s lawsuit against the firm caused USDT and USDC to depeg from the U.S. dollar on the exchange.

Decentralized Stablecoin Market

The decentralized stablecoin market, which includes Dai (DAI), Frax (FRAX) and USDD (USDD), saw its market cap rise by 0.43% to $7.52 billion in July — the first positive month since February. Despite this, the market cap is still 78.1% down from its all-time high of $34.3 billion in April, a downward trend that was triggered by the collapse of the Terra Luna crypto ecosystem and the near 100% depeg of the algorithmic stablecoin TerraClassicUSD (USTC).