Stablecoin Market Cap Suffers Biggest Decline in 4 Years

The stablecoin market saw its largest decline in nearly four years last month.

That’s according to a report Sunday (July 12) by CoinDesk, which calls the downturn a sign that on-chain liquidity has dipped as crypto markets continue to consolidate near this year’s lows.

Stablecoins’ market capitalization dropped by $7.7 billion in June, the report said. That’s the largest dollar amount since May 2022, when the collapse of the Terra-Luna blockchain ushered in a so-called “crypto winter.”

The total value of stablecoins in circulation has dropped by $10 billion since peaking in May, the report added, citing data from RWA.xyz. It’s about a 3% decline on a percentage basis, the biggest such downtrend since 2023, but still short of the 26% plunge seen in 2022.

CoinDesk calls the setback notable as it goes against the optimistic projections on stablecoin growth from the banking world. For example, Citi has revised its stablecoin growth forecast for 2030 to $1.9 trillion in its base case and $4 trillion in a bull case, up from a respective $1.6 trillion and $3.7 trillion.

While the pullback might appear dramatic, the report calls it modest compared to historical standards. Stablecoins saw a much larger drop in 2022 during the implosions of crypto exchange FTX and lenders Celsius, BlockFi and Genesis.

Back then, the market capitalization of major stablecoins slid 26% from about $166 billion in March 2022 to $122 billion by September 2023 as investors fled the crypto space.

In other stablecoin news, PYMNTS wrote last week about an obstacle facing the currency’s mainstream business prospects: whether treasury departments “can process them without dismantling the systems that already manage billions of dollars in daily cash movements.”

That question, the report added, is timely considering the recently launched OpenUSD consortium. Instead of focusing on issuing another stablecoin, that initiative aims to give businesses tools to mint, redeem and integrate stablecoins into enterprise operations.

“The connective tissue, presumably, lets finance departments treat tokenized dollars as another treasury instrument instead of a separate technology project,” PYMNTS wrote.

As covered here in April, the Kansas City Fed found that payment activity makes up less than 1% of stablecoin use, while most of the supply sits idle or circulates within cryptocurrency markets rather than commercial payments. Meanwhile PYMNTS Intelligence found that more than 40% middle market firms have discussed or tested stablecoins, but only 13% of these companies actually use them.