By Richard Hines
Tether and USDC, the two most widely used stable coins in the market, have fallen sharply by more than 20%. Reports show a shift in investors’ activities moving funds from stable assets to conventional currency.
FUD In Stablecoins
As there has been a gradual decline in usage in lending platforms, the market cap and trading volume of the top two stablecoins, Tether and USDC, have seen price drops of over 20% from their all-time highs.
The majority of investors switched from blockchain-based currencies to more traditional forms of currency that were not directly affected by the Federal Authorities’ rate hike. This had the tendency to be the best solution at the time.
After the FTX crash, which impacted the DeFi sector, the annual APR yield fell to 2%, making it extremely unstable, risky, and attack-prone.
Market participants are taking precautions and shifting their investments to more traditional currencies in light of the Fed’s interest rate hike. Over 20% of the market capitalization of these stable coins was shifted to traditional currencies as a result of this action.
Factors Affecting Stablecoins
However, there are other factors that have also had an impact on the stability of the stablecoins. The overall health of the market has prompted investors and users to be cautious with their investments and to take extra precautions with their money in case of volatility spikes, which are common in the cryptocurrency market.
But not all investors have gone this route; some still feel very comfortable keeping their money safe in stables, while a significant number have completely abandoned cryptocurrency.
Exchanges that were documented showed investors exchanging stablecoins for dollars. It is important to note the desperation shown by investors who proceed with this migration despite the high transaction costs they will incur.
Since the FTX crash, things have changed significantly; the enormous cash outflow recorded has driven the market to its lowest point, and the massive dumps that are currently in progress are slowly depleting reserves.
Unfortunately, the market situation does not appear to be improving as the market continues to record a downward trend, with businesses being liquidated and declaring bankruptcy.
Regulators do anticipate a price increase before the year is over and into the beginning of the following one.