Stablecoin’s market cap had fallen to $156.8 billion on Thursday, from about $181 billion in early May, according to data from CoinGecko.
Tether, the world’s largest stablecoin, briefly fell to $0.993 on Wednesday, though it quickly regained parity with the dollar.
“Stablecoin market cap goes hand in hand with sentiment and liquidity in cryptocurrency markets, and it is somewhat concerning that USDT looks set to face another round of sell-offs,” digital asset manager crypto IDEG wrote in a note.
Digital asset markets are facing a perfect storm, which is teetering after cryptocurrency lender Celsius froze withdrawals and transfers between accounts following the demise of stablecoin terraUSD last month, as well as the global tightening of monetary conditions, creating riskier assets like less attractive cryptocurrencies. .
Stablecoins are crypto tokens pegged to the value of traditional assets such as the dollar, and due to their lower volatility, they are the primary means of moving money through digital or cash tokens.
They are also the target of funds arbitrating between exchanges and regions, trying to bet on stablecoins that are marginally underpriced and back under par.
Concerns about Tether Celsius’ exposure, along with lingering concerns about its reserves, have led it to lose more than $5 billion in market cap in the past 30 days.
“There is some recognition that they (Tether) will have some bad loans because of Celsius,” said Joseph Edwards, chief financial strategist at cryptocurrency firm Solrise Group.
“However, Tether’s market cap is still over $70 billion and these things are like a drop in the ocean,” he added.
Tether, for its part, said any Celsius loan was too big and concerns about the composition of its commercial paper reserves were fueled by “false rumours.”
ALGORITHMIC STABLE CURRENCY ALSO INFLUENCE
A number of algorithmic stablecoins – which, like terraUSD, use complex mechanisms to control token supply and maintain their peg to the underlying – have also been affected.
USDD, the algorithmic stablecoin from smart contract platform Tron and the ninth largest stablecoin by market capitalization, lost its peg to the dollar on Monday, falling to $0.96 at one point as shortsellers built extreme positions against cryptocurrency, according to researcher CryptoCompare.
Tron founder Justin Sun has pledged to stake more than $2 billion to defend the stablecoin’s pen.
“I don’t think they even last 24 hours. Short squeeze is coming,” he tweeted Monday. Sun did not immediately respond to a request for comment.
Tron’s DAO, which manages reserves for the stablecoin, said on Wednesday it would withdraw 2.5 billion of its tron tokens from the Binance cryptocurrency exchange to help support the USDD. However, the USDD has yet to regain its peg and is trading at $0.976.
Other algorithmic stablecoins have also seen de-pegs in recent weeks, including stablecoin Frax, which has since surged, and Neutrino USD, which fell to $0.93 on Wednesday and rallied, still trading below the dollar at $ 0.966.
Still, these stablecoins are much smaller than Tether, or even terraUSD at its peak.
“There are still dpegs in algorithmic stablecoins, but they keep repeating themselves…if something bad happened to them, it wouldn’t be a rift in the ecosystem like Tether would have done,” Edwards said.
One of the potential winners of the current turmoil is USD Coin, backed by cash and US Treasury reserves, whose market capitalization has steadily increased from $52 billion to $54 billion over the year. stablecoins struggled.