Stablecoin supplies have been in decline on aggregate since April 2022. The shrinking market for stablecoins could be a lagging indicator of market recovery, according to analysts.

Stablecoin Supplies Shrinking

On July 17, DeFi researcher Jake Pahor posted a Tradingview chart showing the decline in stablecoin capitalization over the past 15 months. 

The total cap has dropped 25% from $160 billion to around $120 billion, according to Tradingview. However, it peaked around six months after the Bitcoin price reached an all-time high in November 2021. 

The Bitcoin cycle bottom was in November and December 2022. Six months later is around now, which could also be the bottom of the stablecoin cycle low. This could be an indication that a longer-term market recovery could be underway.  

CoinGecko has slightly higher figures as it includes more stablecoins in its total capitalization count. With around $128 billion circulating, it represents around 10% of the total crypto market. Moreover, this percentage of market share is way down from more than the 16% share that fiat-pegged assets had last year. 

Tether remains the market leader with a 65% market share and $83.7 billion USDT in circulation. Its supply has grown by 27% since the beginning of 2023, boosted by profits from high-yielding US treasury reserves. 

Rival issuer Circle has seen its supply shrink 38% in the same period to a 21% share with $27.3 billion USDC circulating. 

New Kids on the Block

On July 16, the founder of The Generalist, Mario Gabriele, highlighted the role stablecoins will have in the future of finance. He said that despite regulatory uncertainty in the US, many countries are starting to embrace stablecoins. 

“A mix of start-ups, growth-stage companies, and traditional financial institutions are building products designed to take them mainstream. Even if they don’t realize it, consumers will likely use stablecoins soon.

DeFi lending platform Aave has added its own stablecoin to the burgeoning market. Over the weekend, it launched GHO, an overcollateralized dollar-pegged token minted on Ethereum.

GHO is very similar to MakerDAO’s DAI. It allows users to supply crypto collateral to mint the stablecoin. The official website shows that over $2.2 million GHO has already been minted. 

Source