According to statistics released on Friday, May 13, the market capitalization of the largest stabelcoins is now $163.7 billion, after last week’s stabelcoin economy was valued at nearly $200 billion. Of course, the terrausd (UST) climate crash took billions out of the stabelcoin economy, and Binance’s BUSD stabelcoin recently ranked among the top 10 in cryptocurrency market capitalization. Just as it led to a disaster in the crypto-economy, the recent Terra crash has caused big changes in the stablcoin ecosystem.
The Great Shift in the Stable Coin Economy
Just a week ago, the stablecoin economy was very close to breaking the $200 billion mark, but the recent Terra crash changed everything. Terra’s once stable token, terrausd (UST), was the third-largest among existing stackablecoins until it lost parity at $1. The token, which was supposed to be pegged to the value of the U.S. dollar, now trades at less than $0.20 per unit. Nevertheless, the market valuation makes it the sixth largest market capitalization in coingecko.com’s “Stable Coins by Market Capitalization” list.
Over the past month, of the ten largest stable coin projects by market valuation, none have shown growth. USDC has fallen 0% in the last 30 days, while all other top stable coins have shown a 30-day decline. BUSD is now the third-largest stablecoin token with a market capitalization of $17.3 billion. BUSD also ranked among the top ten cryptocurrencies by market capitalization, ranking ninth among 13,000+ coins.
Makerdao’s DAI token was the fourth largest market capitalization among stackablecoins with $6 billion to date. Makerdao’s native token MKR has jumped 15% in the last 24 hours, taking some of the fallout from UST. In fact, most of the stable tokens that have managed to remain stable and benefit from the UST drop.
While some see the need for a “greater regulatory framework” around fiat coins, some believe decentralized Stablecoin is still needed
On May 12, 2022, Circle Financial CEO Jeremy Allaire tweeted: “USDC/USDT is the deal of the day. Flight to quality.” A Circle executive appeared on CNBC’s “Squawk Box” and noted that “more regulatory framework around stablcoin” is needed. Since the fall of Terra, many people have been watching the performance of so-called decentralized and algorithmic stablecoins very closely.
Despite the recent Terra UST crash, many still believe there is a great need for decentralized and algorithmic stablecoins among the centralized giants. Avalanche (AVAX) founder Emin Gun Sirer believes that the cryptocurrency ecosystem needs a decentralized Stablecoin.
The day before LUNA went under the American penny, Gun Sirer said: “Even fully secured fiat stablcoins have de-pegged. Even some weak [algorithmic] stabelcoins have recovered.” The founder of AVAX also statedthat he has “always said that [algorithmic] stables are subject to destabilizing bank runs. Despite the risk of bank run, Gun Sirer explained that decentralized stackablecoin is still needed in the industry.
“We need a decentralized stackablecoin,” said Gun Sierer. “Stablecoins backed by fiat are subject to legal withdrawal and seizure. A decentralized economy needs a decentralized stablcoin whose backing cannot be frozen or seized.”
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