Crypto Volatility Drives Investors Away from Stablecoins

Photo: Criptotendencia

Investors are withdrawing their money from the cryptocurrency market as stablescoins fluctuate.

The stablecoins market cap had dropped to $156.8 billion from about 181 million dollars in early May, as per data CoinGecko. 

Tether’s price, the world’s biggest stablecoin, fell dramatically on Wednesday night and into the early morning hours today. However, it recovered quickly 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. 

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Stablecoins are cryptocurrencies that maintain a constant price. They’re used for storing funds and transferring them between different types of virtual currency or cash without fear of volatility, making them perfect as an alternative to traditional financial instruments.

Tether’s loss of over $5 million in market cap has been mainly due to concerns about its exposure and assets on reserves.

“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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Opinions expressed by Famous Times contributors are their own.