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Tether’s market capitalization decreases once more, indicating a potential second consecutive monthly decline.
The expansion of tether and other leading stablecoins has stagnated, posing a threat to the overall cryptocurrency market.
Tether experiences a second consecutive monthly decline. (Unsplash, Kanchanara)
Key points:
- The market capitalization of Tether has decreased for a second month in a row, marking an unusual contraction that reflects the post-Terra 2022 downturn and indicates renewed pressure in cryptocurrency markets.
- Experts suggest that a declining supply of stablecoins, along with lackluster interest in U.S.-listed spot bitcoin ETFs, raises questions about the sustainability of any potential recovery in bitcoin and the broader digital asset sphere.
- Although USDC has recovered from its January low to approximately $75 billion in market capitalization, its growth has plateaued this year, highlighting a broader stagnation among major stablecoins.
Tether , the largest stablecoin globally by market capitalization, continues to diminish and appears poised for a second consecutive monthly decline, indicating difficult conditions for a viable broader market recovery.
The market capitalization of Tether has declined by 0.8% to $183.61 billion this month, following a 1% drop in January from its peak of $186.84 billion, based on data from CoinDesk. This situation has not occurred since the collapse of TerraForm Labs in 2022, which erased billions in investor wealth and undermined confidence in stablecoins.
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“Stablecoins serve as the fuel that drives cryptocurrency markets. When this fuel diminishes, everything slows down, and that is precisely what we are witnessing,” stated Rachael Lucas, a crypto analyst at BTC Markets, in a LinkedIn post.
Stablecoins are digital assets whose value is linked to an external reference point, such as the U.S. dollar or other fiat currencies. They are often described as tokenized forms of fiat currencies and assist users in avoiding the price volatility risks associated with other tokens, like bitcoin.
This is why they have evolved over the years into funding currencies for crypto trading and a means of transferring capital across borders, including everyday transactions in some areas.
The ongoing decline in Tether signals capital exit from the cryptocurrency market. This, along with weak demand for U.S.-listed spot ETFs, creates uncertainty regarding the sustainability of possible recovery rallies in bitcoin and the broader crypto market.
Bitcoin , the top cryptocurrency by market capitalization, has struggled to gain momentum since its downtrend halted near $60,000 on February 6. Prices briefly surged above $70,000 shortly thereafter but have since retreated to around $65,000, according to CoinDesk data.
It is worth noting that the growth of other significant stablecoins, like the U.S.-regulated USDCoin (USDC), has also stagnated, although it has proven to be more stable than Tether.
While USDC’s market capitalization has bounced back to nearly $75 billion from its January low of $70 billion, it has remained flat throughout the year.
