Stablecoin Market Cap Suffers 6 Month Shrink: How Is Bitcoin Affected?

Stablecoin market cap drops as Bitcoin struggles to regain $30k level, leading to concerns among crypto traders.

View of a close up grass with a wooden podium and a small dollar coin with tiny frog hovering above it. Behind the podium a gnome is standing and holding his hands together.
Created by Kornelija Poderskytė from DailyCoin
  • The overall stablecoin market cap has been dropping since November.
  • There have been no unusual signs in stablecoin prices that suggest any major changes ahead.
  • Whale and stakeholder actions have provided insights into the market’s direction.

As the market sentiment turns increasingly bearish, it’s worth keeping an eye on stablecoins and how they may impact the cryptocurrency market. Realistically, four potential scenarios could arise regarding the direction of Bitcoin and stablecoin market caps at any given time.

  • Bitcoin market cap goes up; stablecoin market cap goes up.
  • Bitcoin market cap goes up; stablecoin market cap goes down.
  • Bitcoin market cap goes down; stablecoin market cap goes up.
  • Bitcoin market cap goes down; stablecoin market cap goes down.
A chart showing the decline in the stablecoin % supply on exchanges overlaid onto the Bitcoin's price chart from May 2022 till May 2023.
Stablecoin % Supply on Exchanges vs. Bitcoin Price. Source: Santiment

At the time of writing, the combined market cap of stablecoins has been decreasing since November 2022. This is not a good sign and eliminates scenario #1. 

Sponsored

Additionally, since mid-April, Bitcoin has been experiencing a mild retracement, while the combined market cap of stablecoins has also been shrinking. 

However, some argue that whale stablecoin holdings are more important than the overall market cap of stablecoins. Watching what prominent players are doing is often seen as a key indicator of how much buying power is in the crypto market. 

Have Sharks & Whales Peaked in Accumulating Stablecoins? 

It appears that the sharks and whales have somewhat peaked in their accumulation. Tether’s climb has at least paused, as has Dai and Binance USD. USD Coin is the only coin currently seeing considerable holder accumulation moving in the right direction.

A chart showing whale accumulation potentially peaking on multiple stablecoins.
Stablecoin Whale Accumulation Chart. Source: Santiment

Regarding prices, there have not been any significant anomalies that could indicate something is brewing, other than USDP’s rockiness, which has trouble sticking to $1 at all times, like the other top stablecoins. 

Chart of the top 6 stablecoins and their prices relative to their $1 peg all overlaid on each other.
The Top 6 Stablecoins Price Relative to the $1 Peg. Source: Santiment

There also doesn’t appear to be any special activity in terms of raw $100k+ transactions happening on the top six stablecoin networks. 

A chart displaying the activity of accounts with holdings over $100k worth of stablecoins remaining fairly inactive.
Whale Transaction Count Chart. Source: Sentiment

Since the surge of activity that signaled a huge upswing for crypto, major stakeholders in stablecoins have not been making any out-of-line transactions and have been making slightly smaller transactions as their market caps shrink.

On the Flipside

  • The drop in stablecoin market cap could be attributed to the increasing popularity of DeFi projects, which offer more attractive yields and returns than stablecoins.
  • A decrease in the stablecoin market cap could be a healthy sign for the crypto market, as it could indicate a shift towards a more balanced and diversified ecosystem.
  • The impact of the stablecoin market cap on the broader crypto market is a topic of ongoing debate among analysts and experts, with no clear consensus as to its significance or potential outcomes.

Why You Should Care

With Bitcoin struggling to regain the $30k level, the shark and whale holdings of Tether, accumulated aggressively throughout 2023 so far, may be peaking. These trends’ impact could significantly affect the general crypto market and the buying power of key players in the industry.

To learn more about the recovery of $3.8M worth of Deus from a $6M stablecoin hack, read here:

$3.8M DEUS Recovered from $6M Stablecoin Hack

To learn more about Ripple’s expansion in the Middle East with On-Demand Liquidity and Swell Global, read here:

Ripple Expands in Middle East with On-Demand Liquidity and Swell Global

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a cryptocurrency news reporter for DailyCoin, specializing in Ripple, stablecoins, as well as price and market analysis news. Before his current role, Kyle worked as a student researcher in the cryptocurrency industry, gaining an understanding of how digital currencies work, their potential uses, and their impact on the economy and society. He completed his Masters and Honors degrees in Blockchain Technology within Esports and Business and Event management within Esports at Staffordshire University.