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You are here: Home / News / Crypto Market Structure: Volatility, Dominance, & Regulatory Challenges Of Stablecoins
Crypto

Crypto Market Structure: Volatility, Dominance, & Regulatory Challenges Of Stablecoins

July 15, 2023 by Ammar Raza

In the ever-evolving landscape of cryptocurrencies, stablecoins have emerged as a significant force in the market. According to the latest report from Kaiko, stablecoins now account for a staggering 74% of all cryptocurrency trades on centralized exchanges (CEXs).

šŸ’„ The State of Stablecoins šŸ’„

Since the start of 2023, cumulative trade volume for the top five stablecoins has surpassed $3 trillion.

Our latest Deep Dive explores stablecoin market structure šŸ‘‡https://t.co/BzhTFGMV8G

— Kaiko (@KaikoData) July 13, 2023

This dominance is fueled by the popularity of Tether (USDT), which holds a massive 70% market share. However, the stablecoin market is not without its challenges and risks.

In recent months, stablecoins have experienced notable volatility, raising concerns about their reliability. TrueUSD (TUSD) faced uncertainty when Prime Trust, its custodian, shuttered its services. USDT experienced a de-pegging incident due to mysterious selling activity. 

image 48 2

Binance USD (BUSD) struggled with increased volatility following Paxos’ decision to halt issuance, and USDC crashed during a banking crisis in March. These fluctuations underscore the dependence on centralized stablecoins and the need for greater transparency regarding their reserves.

Stablecoins Command 74% of Cryptocurrency Trades

Upcoming European reĀ­gulations seek to address goveĀ­rnance issues relateĀ­d to stablecoins, but significant progress still lies aheĀ­ad. Currently, fiat currencies hold a reĀ­latively minor position in global cryptocurrency markets, comprising only 23% of theĀ­ market share. In contrast, stablecoins dominateĀ­ the remaining 74%.

image 48

Upon examining theĀ­ trade volume across centralizeĀ­d and decentralized eĀ­xchanges, it becomes cleĀ­ar that Tether stands unrivaled as theĀ­ leader, commanding an impressiveĀ­ 70% market share on CEXs. 

Binance USD (BUSD), once a potential competitor, has encountered regulatory challenges, causing its market share to drop from 30% to a mere 6%. The most remarkable rise has been witnessed by TrueUSD (TUSD), climbing from less than 1% to 19% in just three months. Binance’s promotion of a zero-fee BTC-TUSD pair propelled its ascent.

On decentralized exchanges (DEXs), the landscape is different. DAI, the only decentralized top stablecoin, has seen its dominance eroded by USDC and USDT. The shift can be attributed to the relative capital efficiency of each stablecoin, as DAI requires over-collateralization to mint tokens, while the centralized counterparts do not.

image 48 3

Nevertheless, the future trajectory of the stablecoin market structure will largely depend on regulatory actions and the willingness of issuers to enhance transparency. Unless a coordinated global ban or comprehensive legislation is enacted, the market will likely retain its current structure, posing risks and opportunities for participants.

Related Reading | Ripple’s Legal Triumph: XRP Cleared of Security Status, Igniting Crypto Celebration & Price Surge

Filed Under: News, World Tagged With: BUSD, Cryptocurrency, Stablecoins, TrueUSD, USDC, USDT

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