The combined market capitalization of major stablecoins fell from around $166 billion in March 2022 to $122 billion in September 2023, RWA.xyz data shows — a drop of over 26% as investors pulled money from the digital asset market.
Tether’s USDT fell from $78 billion to $65 billion between March and November 2022. For USDC, the downward trend took much longer to play out, falling from $55 billion in July 2022 to below $24 billion in November 2023, exacerbated by the collapse of banking partner Silicon Valley Bank in March 2023.
The implosion of TerraUSD, the algorithmic stablecoin of the Terra-Luna crypto project, also wiped $18 billion from the stablecoin market.
The current decline is only a temporary setback in a long-term upward trend, an analyst said.
“The recent drop in stablecoin market capitalization represents a relatively small setback in what we believe is a long-term growth market,” said Paul Howard, senior director at trading firm Wincent.
“Short-term fluctuations in liquidity are normal, but they do not change our view that stablecoins will continue to play an increasingly important role in the digital asset ecosystem,” he added.
Increasing stablecoin competition
Looking beyond the headline drop, the trend seems more nuanced.
Part of the slowdown reflects a changing competitive landscape. As stablecoins move beyond crypto-trading and into mainstream payments, new issuers have entered the market following regulatory advances such as the GENIUS Act in the US
