Stablecoin supply down below $125 billion as capital continues to leak from crypto

Key Takeaways

• The total supply of stablecoins has fallen every month since UST collapsed in May 2023
• Last month saw another $1.7 billion of outflows, the total supply now 33% off its peak
• Tether’s market share has increased amid stuttering rivals, but all other coins have seen large drawdowns
• Liquidity and volume in the space overall is thin and continues to fall

If one wanted to sum up the past few years in crypto, the stablecoin market would be a good place to start. 

The branch of the industry so important for liquidity has been heavily dented, with the total supply of stablecoins on the market now less than $125 billion. That represents a 33% decline from the peak of $188 billion, on the eve of the Terra collapse last May.

Since that infamous Terra meltdown, which saw the $18 billion UST not-so-stablecoin evaporate into thin air, the market has continued to pare down. In line with a tightening in financial conditions across the economy, the stablecoin supply has been reduced every month since. 

Last month saw another $1.7 billion reduction, the third largest of 2023. 

Tether market share increases 

To track the movements closer, you can hit “play timeline” on the below chart. Breaking down the overall supply into the largest stablecoins, nearly every coin has been hit hard. Nearly, that is, because there is one glaring exception: Tether. 

Somewhat ironically, given its long-debated cloudy reserves, Tether has re-established an absolutely dominant market share. Benefitting not only from the aforementioned demise of UST, but also the regulatory shutdown of BUSD ion February and the SVB-related fear (albeit brief) surrounding USDC in March, the Europe-based stablecoin has managed to avoid the harsh regulatory crackdown in the US and hoover up some of the capital fleeing rivals.

Its market share currently sits at a colossal 67%. With a market cap of $83 billion, the company revealed it generated an astonishing $1 billion in operating profit in Q2 alone, mainly due to the stout yields currently on offer through US Treasurys. 

Yet aside from Tether being well placed to take advantage of the obstacles that have suppressed rivals, the stablecoin market overall demonstrates the trouble of the cryptocurrency at large. 

Liquidity and volumes have collapsed, with volatility accordingly close to all-time…