As stablecoins’ total market capitalization fell by approximately $17 billion to its lowest level in more than a year, CryptoQuant said new liquidity needs to enter the market for the rally to continue.
According to data shared by CryptoQuant, stablecoin market capitalization fell from approximately $280 billion in April to $263 billion. The analysis puts the contraction over a period of approximately six months at 6 percent.
Stablecoins are among the tools investors use to hold funds and trade in the crypto market. Changes in their total market capitalization are therefore monitored as an indicator of potential buying power and liquidity entering the market.
Why is the inflow of new money weak?
The analysis primarily links the contraction to weak demand and limited liquidity inflows. Alongside geopolitical and economic developments, security breaches in the crypto ecosystem may also have heightened investors’ perception of risk.
Against this backdrop, the key question is whether the inflow of new funds into the market will pick up again. CryptoQuant points out that investors see greater risk in turning to crypto.
Liquidity warning for the rally to continue
According to CryptoQuant, liquidity returning to the market is important to sustain the positive price trend of recent months. The analysis notes that continued weak inflows could increase the risk of this trend reversing.
This contraction in the global stablecoin market covers a different measure from the 24-hour net inflow of funds to Binance we reported earlier: one reflects short-term movements on a single exchange, while the other shows the stablecoin market’s total size over a longer period.
Not investment advice.