Stablecoin market down as redemptions surge – Cryptopolitan

While the global cryptocurrency market has seen a significant rise, registering a 41.77% increase since the beginning of this year and accumulating a total value of $1.17 trillion, the stablecoin sector presents a contrasting story.

It has seen a remarkable contraction of $7.3 billion in a 140-day period, shedding light on an unexpected trend in an otherwise booming crypto-economy.

The ebb and flow of stablecoin value

Data coming out in 2023 reveals a $7.3 billion decline in the stablecoin economy. Records from early January showed the value of the stablecoin market at a solid $138.12 billion.

Fast forward to today, and this figure is down significantly to $130.79 billion. This decline can be largely attributed to multiple large-scale stablecoin projects that saw significant redemptions in the past four months.

USDC, for example, has seen over $14 billion in bailouts, and BUSD has not been immune to this trend either, having suffered over $11 billion in bailouts.

DAI has also felt the impact with ransoms totaling $361 million. Despite this downward trend in USDC and BUSD, other stablecoin projects have shown growth and managed to offset some of these losses.

TUSD has seen its market capitalization increase from $846.57 million at the beginning 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 rise from $66.29 billion in early January to its current value of $82.95 billion, marking an increase of 25%.

Examining the future of stablecoins amid de-dollarization

Despite the decline, the stablecoin market still represents a sizable part of the overall crypto economy. The $10.77 billion in stablecoin trades recorded on May 21, 2023 represents 57.9% of the total 24-hour trading volume across 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, representing 81.36% of global trade volume for the day.

As the world continues to watch the US dollar's diminishing role as a global reserve currency, the future of the stablecoin market is being called into question.

Data from the International Monetary Fund shows that the US dollar now makes up just over 58% of world foreign exchange reserves, a significant drop from its 71% share in 2001.

Jeremy Allaire, CEO of USD Coin (USDC) issuer Circle, raised concerns about this “very active de-dollarization” during the Consensus 2023 conference.

He stated that to remain competitive, the US must digitize its currency and enforce stablecoin legislation. Countries like Russia and China are already taking steps toward de-dollarization, looking to replace the US dollar with digital assets, other fiat currencies, or even a possible BRICS currency.

Such trends are evident in China, where the yuan recently overtook the US dollar as the country's most widely used cross-border currency. This increased use marks a stark contrast to 2010, when the yuan was used in almost 0% of transactions.

Another example can be seen in El Salvador, which, in 2021, became the first country to officially use Bitcoin as legal tender. As the de-dollarization process continues to gain momentum, the future trajectory of the stablecoin market remains a topic of great interest.

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