Stablecoin Trading Volume Rises as Crypto Investors Shelter from Market Drop

Data reveals there has been a spike in stablecoin activity over the past 48 hours as the cryptocurrency’s market capitalization has risen from its $2 trillion status to $1.55 trillion , as investors try to cushion the losses caused by the market sell-off.

On Friday, flagship cryptocurrency asset Bitcoin fell below its $40,000 support zone to trade as low as $34,349.25, losing around $5,250 in one day, representing a decrease of 12.83%. For the year, Bitcoin is down around 25%, signaling the start of a cryptocurrency bear market.

Altcoins have seen worse as they have lost over 30% of their value, dropping from $1.35 trillion at the start of the year, to $919 billion currently, losing around $431 billion in market capitalization. This has effectively caused the altcoin market to lose its trillion-dollar status, as they are all posting double-digit losses, so far, for the year.

What you should know

  • Data from Nomics reveals a spike in USDT of Tether, the most capitalized stablecoin pegged to the US dollar, daily trading volume. Between Thursday and the day of the crash, Friday, USDT trading volume increased by 68.74%, from $68.45 billion to $115.50 billion. On Saturday, USDT trading volume showed no signs of falling as it posted a daily volume of $109.21 billion.
  • We are experiencing the same spike for Circle’s USDC and Binance’s BUSD, the second and third most capitalized stablecoins. USDC recorded a peak of 126.13% between Thursday and Friday, rising from $3.98 billion to $9 billion, while BUSD recorded a peak of 86.18% in daily trading volume, from $3.40 billion to $6.33 billion.
  • The trio posted a combined trading volume of $130.83 billion on Friday, higher than the trading volume of Bitcoin, which posted a daily trading volume of $59.48 billion and Ether, which posted a daily trading volume of $59.48 billion. trading volume of $43.69 billion on the same day. Even when the trading volume of Bitcoin and Ether are combined, they still fall short of the daily trading volume of the trio, suggesting traders are taking the safety of stablecoins during this bear market.
  • Data from Glassnode reveals that BUSD exchange outflow volume hit a one-month high of $7.2 million. USDC FX outflows also hit a 7-month high of $9.72 million. USDT supply of smart contracts hit a 4-year high of 22.961%. All of this points to a flight of investors to stable assets, in an effort to stem the losses seen in the market.

The last time we saw such high stablecoin activity was between the 5and and 7and of January 2022, when Bitcoin lost around $7,000 from $47,000 to trade at $40,600 during the period. Investors are reminded that cryptocurrencies are speculative assets and are advised to trade with caution.