Stablecoin is now ruling the market and beating the economies of Bitcoin and Ethereum
Cryptocurrencies have had a wild ride this year as Bitcoin and Ethereum have fallen more than 70% from their all-time highs in November 2022. Earlier, experts said that the correlation of the crypto market with the stock market has worsened the state of the digital asset domain. Markets took a sharp turn in June, where major stablecoins also fell, due to unexpected market volatility. In addition, a significant portion of the overall value of the crypto market has fallen due to the recession, rising interest rates, and the increasing involvement of crypto regulators and legislators. Despite this, people’s interest in crypto remains high. But their growing interest now surrounds stablecoins. Reports claim that the stablecoin now accounts for nearly 15% of the total value of the crypto market. The combined market capitalization of Tether, USD Coin, and Binance USD has doubled this year, jumping from 7% in January to 16% in December. Meanwhile, the biggest cryptocurrencies in the market, Bitcoin and Ethereum, keep rejecting major price lows and pushing investors towards even bigger losses. So is it time for stablecoins to take over the market? Let’s dig deeper.
The State of Stablecoins in Crypto Winter 2022
The recent market volatility is considered special for many reasons. Thanks to the winds of recession, rising interest rates and the war in Ukraine, even some of the safest investments in the crypto market have fallen drastically. TerraUSD (UST) was one of the fastest growing stablecoins on the market, and its catastrophic fall shook the entire market. UST has lost nearly 98% of its market cap, wiping out all the gains Bitcoin and Ethereum made over the past year. TerraUSD’s massive implosion also caused several other major cryptocurrencies such as Tether and BinanceUSD to lose their peg to US$1. This drastic change forced investors to flee the market as the likely safe investments in the market also turned out to be extremely volatile. In general, new investors entering the market consider stablecoins a worthwhile investment, and for low-risk cryptocurrency users looking for, as mentioned earlier, stablecoins are considered the safest investment class on the market. But the stablecoin’s 2022 crash shook the investment community, causing several investors to flee the market.
So are stablecoins a good investment opportunity right now?
Reports show that stablecoins had the biggest jump among cryptocurrencies. These cryptocurrencies have shown great resistance to market volatility and have significantly increased their market share. Tether has doubled its market share expanding by 7.7% since the post-TerraUSD decline. The market capitalization of the world’s second largest stablecoin USD Coin jumped from 1.9% to 5% during the same period. BUSD’s market share quadrupled to 2.6%. Now together, these three stablecoins account for 15.3% of the total value of the crypto market, showing increased progress in price movements.
In short, when the summer of 2022 brought the coldest dream for the crypto market, as the end of the year approaches, stablecoins are trying to re-establish the lost importance of the market in the economic and financial markets. However, investors still need to be extremely careful while dealing with these cryptocurrencies and should always use the advice of financial consultants.