Money from the stablecoin market migrates to the bitcoin and altcoin market

Currently the cryptocurrency market has a divergence. While the market capitalization of bitcoin (quotation BTC) and altcoins are on the rise, stablecoins are on the decline. 

In fact, since the end of November, the market capitalization of bitcoin has increased by 51%, reaching 458 billion dollars. And, as a rebound effect, the market capitalization of altcoins has increased by 33% to $631 billion since December. The data from CoinMarketCap indicate this. 

As seen in the chart, this upward trend intensified in 2023 as cryptocurrency prices increased. As we reported, bitcoin hit a six-month high in February.

However, stablecoins, while counted among altcoins, have not experienced an increase in market capitalization in recent months. In fact, their capitalization fell for an 11th consecutive month in February, according to a report by data firm CryptoCompare. 

The company notes that the stablecoin market cap currently stands at $136 billion, as shown in green in the chart. This figure implies a decline to September 2021 levels and a 28% drop from the $190 billion peak in April 2022.

The firm also claims that stablecoins' current dominance over other cryptocurrencies is 11,4%, the lowest percentage since April 2022. This decline, which has deepened over the past month as prices rally of cryptocurrencies, would suggest a reallocation of capital from stablecoins to volatile currencies. 

The capitalization of USDT has increased while that of stablecoins has decreased

In this context, there has also been a redistribution of capital within stablecoins. This is demonstrated by the capitalization of tether (USDT), which has increased by 7,8% to $70 billion since the end of November, according to CoinMarketCap. 

USDT thus strengthens its position as the most used stablecoin with a dominance of 51,7%, according to estimates by CryptoCompare. The firm pointed out that this is the highest share of the stablecoin market since October 2021.  

This scenario comes in a month in which the New York Department of Financial Services ordered to stop issuance of Binance USD (BUSD), the third largest cap stablecoin. And this may have driven USDT outflows and migrations recently. 

In turn, this all comes as regulators set their sights on stablecoins following the collapse of one of them last year, Terra USD (UST). These events may have triggered some outflows and redistribution in the market.