The stablecoin market is on track to shrink for the 14th consecutive month, a sign of capital draining from the digital asset space, and a troubling trend for the recovery of cryptocurrency prices.
The total market capitalization of stablecoins dropped to $130 billion in May, falling to the lowest level since September 2021, digital asset data firm CCData noted Tuesday in a market report. The stablecoin market has been in a continuous decline since March 2022, per CCData.are a subset of cryptocurrencies that peg their price to an external asset, predominantly to the U.S. dollar.
Analysts argue that the contraction of the stablecoin market poses headwinds for cryptocurrency prices, as it signals deteriorating liquidity. “Stablecoins are the liquidity of the crypto ecosystem. The more liquidity, the more ability for investment and speculation,” Tom Dunleavy, macro analyst said in a note to CoinDesk. “The continued reduction, despite the growing number of applications, says to me we are still not out of the woods for this secular bear market.”
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