The combined market capitalization of major stablecoins fell from roughly $166 billion in March 2022 to $122 billion by September 2023, RWA.xyz data shows — a decline of over 26% as investors pulled money from the digital asset market.
Tether's USDT fell from $78 billion to $65 billion between March and November 2022. For USDC, the downtrend took much longer to play out, falling from $55 billion in July 2022 to below $24 billion by November 2023, exacerbated by its banking partner Silicon Valley Bank's collapse in 2023 March.
The implosion of TerraUSD, the algorithmic stablecoin of the Terra-Luna crypto project, also wiped out $18 billion from the stablecoin market.
The current decline is only a temporary setback in a long-term uptrend, one analyst said.
“The recent decline in stablecoin market cap represents a relatively small pullback in what we believe is a long-term growth market,” said Paul Howard, senior director at trading firm Wincent.
“Short-term fluctuations in liquidity are normal, but they dont change our view that stablecoins will continue to play an increasingly important role in the digital asset ecosystem,” he added.
Increasing stablecoin competition
Looking beyond the headline decline, the trend appears more nuanced.
Part of the slowdown reflects a changing competitive landscape. As stablecoins move beyond crypto trading and into mainstream payments, new issuers have entered the market following regulatory progress such as the GENIUS Act in the U.S.