Stablecoin Market Dominance Hits 18-Month Low: What's Driving Investors Away?

cryptonews.com:

Stablecoin market dominance has reached its lowest point in 18 months, according to a Monday report.

Amid a volatile year for cryptocurrencies, the stablecoin sector has experienced a sustained decline. As reported by CCData, the decrease has persisted for 18 months, causing market dominance to fall to 11.6% as of September. The downward trend has had investors and market watchers questioning the factors contributing to the decline.

The stablecoin sector has seen its total market capitalization drop to $124 billion. Major players like USDP, USDC, and BUSD have all faced declines according to the report. USDT, the largest stablecoin by market cap, has managed to sustain its growth, however. 

Stablecoins are designed to keep a stable value through various mechanisms, often backed by fiat currencies, commodities, or algorithms. Despite a 10.9% increase in stablecoin trading volumes, which reached $406 billion in August, the overall activity on centralized exchanges has been dwindling, with trading volumes expected to decrease further in the coming months.

Factors such as lawsuits from the United States Securities and Exchange Commission (SEC) against leading crypto exchanges like Binance and Coinbase have impacted the sector. Additionally, the race to list Bitcoin ETFs has also contributed to fluctuations in stablecoin trading volumes.

Investors have been cashing out of stablecoins to invest in traditional assets, influenced by rising yields in fixed-income securities. Yields on 10-year U.S. Treasury bills, for example, have seen a considerable rise, currently standing at 4.49%, in response to the Federal Reserve's efforts to control inflation.

Kadan Stadelmann, Chief Technology Officer of Komodo shared his thoughts on the matter