Markets
Stablecoin market cap jumps to $164 billion after months of stagnation as capital flows into cryptocurrencies
Stablecoins, which serve as a source of funding for many cryptocurrency trading strategies, are seeing growth after months of stagnation, demonstrating a renewed influx of capital into the cryptocurrency market.
The aggregate market capitalization of the stablecoin sector, which includes hundreds of coins, has jumped to over $164 billion for the first time since its inception. Earth’s Collapse as of May 2022, according to data source DefiLlama and trading firm Wintermute. It was languishing around the $160 billion mark.
Stablecoins are digital currencies whose values are hooked to an external referencelike the U.S. dollar. Tether’s USDT, the leading dollar-pegged stablecoin, alone boasts a market cap of $114.26 billion.
These coins help investors mitigate market volatility because they maintain a fixed value against the external reference. They are widely used to finance cryptocurrency purchases, derivatives trading, and income-generating strategies such as lending through decentralized finance (DeFi). Stablecoins are also being used for real-world payments and cross-border remittances.
The expansion “indicates growing investor optimism, supporting a bullish outlook,” Wintermute said in a note shared with CoinDesk. “The increase in stablecoin supply indicates that money is being placed into on-chain ecosystems to generate economic activity, whether through direct on-chain purchases that can catalyze price appreciation or through yield-generating strategies that could enhance [market] liquidity. This activity ultimately drives positive on-chain growth.”
Blockchain analytics firm Nansen expressed a similar view on X, calling the stablecoin’s expansion a bullish development.
However, the two largest cryptocurrencies – bitcoin (BTC) and ether (ETH) – fell 5.5% and 10%, respectively, this week, CoinDesk data shows.
The price plunge is likely due to a sell-off reaction to Tuesday’s debut of highly anticipated spot ether ETFs in the U.S. and a sharp decline in Wall Street’s tech-heavy Nasdaq 100 index. The index fell 3.7% on Wednesday, wiping out $1 trillion in market value.