The recent resurgence of the crypto market and the surge in Bitcoin prices to nearly all-time highs this year have failed to bring about a similar boost for stablecoins. Despite the overall rally, stablecoin volumes and the sector’s aggregate market capitalization have experienced a decline, as highlighted in a report from the rating agency.
Fitch: Stablecoin Volumes Fail to Benefit from Crypto Market Rebound
According to data from The Block’s data dashboard, the total supply of stablecoins has decreased from $138 billion at the beginning of the year to $124 billion as of July 3rd. Just to clarify, Tether’s USDT has defied this trend by gaining market share from its competitors since the de-pegging incident of USDC in March.
However, the average daily trading volumes of the top ten stablecoins decreased from $53 billion in March 2023 to $28 billion in May.
Nonetheless, Fitch acknowledges that there is better liquidity in the assets that back stablecoins. While stablecoins are designed to trade at a one-to-one ratio with a fiat currency, usually the US dollar, they are not exclusively backed by it. The underlying assets of encompass a variety of assets with different liquidity profiles.
“Stablecoin volumes pointed out that within USDT’s reserve portfolio, the proportion of treasury bills and repurchase agreements (repos) increased by 6 percentage points and 5 percentage points in the first quarter, respectively, reaching 65% and 10% of reserves by the end of the first quarter of 2023.” the company stated.
The repos in the portfolio are overcollateralized by long-term US treasury securities and are callable daily.
Fitch
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