According to statistics as of Friday, May 13, the best stablecoins by market capitalization are currently worth $163.7 billion after the stablecoin economy was valued at nearly $200 billion last week. Of course, the climax-terrausd (UST) failure wiped out billions from the stablecoin economy, and Binance’s stablecoin BUSD has recently entered the top ten crypto market capitalization positions. Much like the carnage in the crypto economy, Terra’s recent demise has caused a major shift within the stablecoin ecosystem.
The Great Shift of the Stablecoin Economy
It was just a week ago when the stablecoin economy nearly crossed the $200 billion mark, but Terra’s recent collapse changed all that. Terra’s once stable token terrausd (UST) was once the third largest stablecoin in existence until it lost its $1 parity. The token that should be pegged to the value of a US dollar is now trading for less than $0.20 per unit. Still, its market valuation makes it the sixth largest market cap in coingecko.com’s “Stablecoins by Market Capitalization” list.
During the past month, none of the stablecoin projects saw growth from the top ten stablecoins by market valuation. USDC fell 0% in the past 30 days, while all other top stablecoins fell for 30 days. BUSD is now the third largest stablecoin token with a market cap of $17.3 billion and BUSD has also moved into the top ten cryptocurrencies by market cap, taking ninth position out of more than 13,000 coins.
Makerdao’s DAI token is now the fourth largest stablecoin market cap at $6 billion today. Makerdao’s native token MKR is up 15% in value in the past 24 hours, taking over some of the fallout from UST. In fact, most stablecoins have managed to stay stable and have reaped the benefits of the UST crash.
While some see the need for ‘more regulatory framework’ around Fiat-pegged coins, some believe a decentralized stablecoin is still needed
On May 12, 2022, Jeremy Allaire, CEO of Circle Financial, said, tweeted: “USDC/USDT is the trade of the day. Flight to quality.” The Circle executive appeared on CNBC’s “Squawk Box” broadcast and noted that there should be “more regulatory framework around stablecoins”. A number of people have been closely monitoring the performance of so-called decentralized and algorithmic stablecoins since Terra’s demise.
Despite the recent Terra UST massacre, many still believe that there is a great need for decentralized and algorithmic stablecoins among the centralized giants. Avalanche (AVAX) founder Emin Gun Sirer believes that the crypto ecosystem needs a decentralized stablecoin.
A day before LUNA went under a US cent, Gün Sirer said: “Even fully backed fiat stablecoins have been decoupled. Even some of the weak [algorithmic] stablecoins have recovered.” The founder of AVAX too declared that he had “always said that” [algorithmic] stables are subject to destabilizing bank runs.” Despite the banking risk, Gün Sirer explained that a decentralized stablecoin is still needed in the industry.
“We need a decentralized stablecoin,” Gün Sirer told me. “Fiat-backed stables are subject to legal repossession and imprisonment. A decentralized economy needs a decentralized stablecoin whose backing store cannot be frozen or confiscated.
What do you think of the stablecoin economy shuffle this week? Let us know what you think about this topic in the comments section below.
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