The combined market capitalization of major stablecoins fell from about $166 billion in March 2022 to $122 billion in September 2023, RWA.xyz data shows — a decline of more than 26% as investors pulled money out of the digital asset market.
Tether’s USDT fell from $78 billion to $65 billion between March and November 2022. For USDC, the downtrend took much longer to develop, falling from $55 billion in July 2022 to less than $24 billion in November 2023, exacerbated by the collapse of its 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 off the stablecoin market.
The current decline is just a temporary setback in a long-term uptrend, one analyst said.
“The recent drop in stablecoin market capitalization represents a relatively small pullback in what we believe is a long-term growth market,” said Paul Howard, senior director at trading firm Wincent.
“Short-term liquidity fluctuations are normal, but do not change our view that stablecoins will continue to play an increasingly important role in the digital asset ecosystem,” he added.
Increased competition from stablecoins
Beyond the headline decline, the trend appears more nuanced.
Part of the slowdown reflects a changing competitive landscape. As stablecoins move beyond cryptocurrency trading and become mainstream payments, new issuers have entered the market following regulatory advances such as the GENIUS Act in the US.
