Stablecoins See Largest Drop in History as Crypto Exodus Continues

Stablecoins

Aggregate stablecoin supplies have shrunk by their largest amount on record over the past month as capital continues to flow out of the crypto.

On May 19, on-chain analytics provider Glassnode reported that aggregate stablecoin supplies declined by a total of $8.4 billion in the last month. It added that this has been the largest decline in history.

The fallout from the collapse of the Terra ecosystem has impacted the rest of the stablecoin ecosystem as circulating supplies continue to contract.

All major stablecoins, centralized or otherwise, have seen supplies shrink this month, but two have managed to rebound from the rout.

Stablecoins: a shrinking pot

At their peak, the total market capitalization of all stablecoins combined was nearly $200 billion. Today, that figure has dropped to $162.7 billion according to CoinGecko which also reports a daily trading volume of $63.8 billion.

In its weekly on-chain report, Glassnode referred to an “unstable coin contagion” depicting how the collapse of UST has brought down the rest of the stablecoins.

Tether briefly decoupled from the dollar last week but managed to regain its composure. Its supply fell nearly 12% from a peak of $83.2 billion earlier this month to $73.4 billion according to Tether’s transparency report.

With UST out of the picture, Binance USD is once again the third-largest stablecoin by market cap. Its supply is near its peak at just over $18 billion having rebounded from a drop to $16.5 billion on May 12.

Circle’s USDC is also back in terms of supply as it is often seen as a safer alternative as it is fully regulated. According to the company, there is 52.3 billion USDC in circulation. Glassnode reported a drop to $48.4 billion right after Terra’s collapse, but it managed to recover.

MakerDAO’s decentralized stablecoin, DAI has seen a supply decline by a whopping 24.4% as two billion DAI has been burned according to Glassnode. DAI supply contracts when debt holders close out their positions by repaying and burning the stablecoin. “This process can be discretionary, or forced in the event of a vault liquidation,” Glassnode added.

Crypto Market Cap Drops Again

The exodus from the crypto market has driven down the supply of stablecoins as traders and investors cash in fiat.

Markets are down a further 3.5% over the past 24 hours resulting in a total market cap fall to $1.3 trillion, its lowest level since a similar dip last July.

Things are now at a crucial point at this level of support, as the next one is $300 billion to $1 trillion lower in terms of total market capitalization. Crypto markets haven’t been this low since January 2021, and analysts have warned that the bears may not be over yet.

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