Investors are getting out while they still can, as market volatility rampant. As a result, stablecoins have plummeted.
The stablecoins market cap has plunged over the past few weeks, from about $181 billion in early May to only $156.8 billion.
Though not as large of an extent, Tether’s price also saw a drop to $0.993 on Wednesday and 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 a type of crypto token that maintains stability within its value. They’re used to transfer funds between digital currencies or cash because they have lower volatility than other coins.
The recent concerns over Tether’s exposure to Celsius and the growing worries about its reserve assets have contributed to a loss in market cap exceeding $5 million within 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.”