Stablecoin market shrinks for 14th month in a row, effect on prices?

The crypto industry has many individual parts that all exert their influence in their own way. The same goes for stablecoins. Unfortunately, this market is still shrinking considerably, which could be detrimental to the rest of the market.

Stablecoins shrunk sharply in May

CoinDesk has a report of CCData read in. In this, CCData researcher Tom Dunleavy explains that the stablecoin market contracted for the 14th month in a row in May. The market has not been as small as it is now since September of 2021.

The total value of all stablecoins is according to CoinGecko currently about $130 billion, and the daily tradevolume is around 27 billion dollars. Monthly volume even fell 40.6% in May to $460 billion.

DThis market is very important, because many crypto exchanges use stablecoins like USDT and USDC in trading pairs. The tokens allow you to move into the crypto ecosystem without actually having to exit the market when you sell.

Remarkably enough, TrueUSD (TUSD) does not participate with many other shrinking coins. Not only has the market value of the coin more than doubled in March, its trading volume has also increased to a whopping $29 billion per month. That is even higher than that of BUSD and USDC.

Stablecoin shrinkage bad for crypto?

The contraction is not expected to be good for the crypto market. If the volume of stablecoins is declining, that suggests interest in the market has diminished. Usually that is bad for the prices.

In fact, Dunleavy thinks the bear market may not be over yet. Recently, JP Morgan shared this view for exactly the same reasons. The news is also reflected by news that even USDT volume has not been as low as it is now for years, despite the market value rising sharply.

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