Stablecoins – usually considered the market’s safest investments, sees major cryptocurrency volatility as investors withdraw money from the sector, and many lose hope in their underlying assets.
On Thursday, the stablecoins market cap had plunged to $156.8 billion from about $181 billion in early May, according to data from CoinGecko.
Tether, the biggest stablecoin in the world, shortly saw a drop to $0.993 on Wednesday, but it swiftly recovered against the dollar.
In a note written by a crypto digital asset manager, IDEG, says, “Stablecoin market cap goes hand in hand with sentiment and liquidity in crypto markets, and it’s slightly worrying the USDT appears to see another round of liquidations.”
Digital asset markets are experiencing a fitting hurricane, hovering after Celsius, a crypto lender, halted withdrawals and transfers between accounts in the wake of the terraUSD stablecoin demise last month, also attributing to the worldwide more arduous monetary conditions putting riskier assets like cryptocurrencies to less attractive levels.
Stablecoins are crypto tokens ranging from the value of assets like the dollar. It is also the primary token for transferring funds between digital tokens or cash because of its lower volatility.
Concerns on reserves-supported Tether’s exposure to Celsius and the growing worries about its reserve assets have contributed to its loss of over $5 million in market cap over the last 30 days.
“There is some recognition they [Tether] are going to have some bad loans because of Celsius,” stated crypto firm Solrise Group’s head of financial strategy, Joseph Edwards.
But “Tether’s market cap is still above $70 billion, and these things are like a drop in an ocean,” he further said.
According to Tether, any Celsius loans were overcollateralized, and concerns about the composition of its commercial paper reserves were ignited by “false rumors.”
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