Decrease in stablecoin usage as Ethereum staking and Layer-2 solutions experience significant expansion in the second quarter of 2023.

In a relatively stable second quarter, Bitcoin and Ethereum have increased their market shares to surpass 70% of the total cryptocurrency market capitalization for the first time since April 2021.

Source: BTC.D + ETH.D TradingView

Simultaneously, the recently published Crypto Market Insights Report 2023Q2 by TokenInsight reveals that the cryptocurrency market experienced a decline in the overall market capitalization of stablecoins.

Source: TokenInsight

The report states that the stablecoin market capitalization fell by 7% in the first half of 2023, reaching $128 billion by the end of June.

An analysis by CryptoSlate of the combined BTC and ETH dominance charts indicates a rise of 12%, suggesting that factors beyond a transition from stablecoins have played a role in the increased dominance of Bitcoin and Ethereum.

The TokenInsight report points to regulatory measures against two prominent stablecoins, USD Coin (USDC) and Binance USD (BUSD), as contributors to the declining trend in stablecoins. Following the bankruptcy of one of its reserve banks, USDC’s market cap decreased by 22.3% in March. Concurrently, the issuance of BUSD was suspended, resulting in a 75% drop in its market cap.

Ethereum Staking Surges Post Shapella Upgrade

Additionally, the report highlights that the Ethereum Shapella upgrade in Q2 has acted as a catalyst for increased staking, rising from 15% to nearly 20%.

This shift has led to a significant increase in staked Ethereum, reaching 23.54M ETH by the end of June, marking a 48.4% rise.

Maintaining its leading position, Lido experienced a 32.6% increase in its staked ETH, totaling 7.5M ETH, reflecting the market’s growing confidence in Ethereum’s vision and the potential for earning passive income through staking.

LSDFi Market and Layer-2 Networks Exhibit Growth

Delving deeper into the data, it is evident that the LSDFi (Liquidity Staked DeFi) market experienced an eight-fold increase in its total value locked (TVL), with Lybra Finance emerging as the largest LSDFi pool.

This rapid expansion in the LSDFi market highlights the increasing integration of DeFi protocols with LSD, emphasizing the broadening scope and influence of DeFi within the cryptocurrency landscape.

Layer-2 networks also showed remarkable growth. Notably, zkSync, the first ZK-Rollup Layer-2 network, recorded an 861.89% rise in its TVL.

This indicates the growing adoption and advancement of Layer-2 solutions as the Ethereum community seeks scalable, secure, and efficient transaction processing methods.

Bitcoin’s NFT and Transaction Spike

While Ethereum has been advancing, Bitcoin experienced a notable increase in daily average transactions in May, tripling since the beginning of the year. This surge can be partially attributed to the emergence of Bitcoin Ordinals, akin to NFTs, which led to a rise in transactions and fees.

The increase in Ethereum staking, the growth of LSDFi, and the evolution of Layer-2 networks are significant developments that may influence the future direction of the cryptocurrency market. The complete TokenInsight report is available for download from its website.

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