The steady decline of stablecoins: Regulatory roadblocks and volatile markets

ambcrypto.com:

While stablecoins were designed to maintain a stable value, recent months have demonstrated that they are not impervious to the volatile swings in the cryptocurrency market. Furthermore, their close association with the fluctuations in Bitcoin’s [BTC] value has become increasingly evident over time.

According to data from Santiment, the five largest stablecoins by market capitalization, namely Tether [USDT],USD Coin [USDC], Binance USD [BUSD], DAI, and Pax Dollar [USDP], have experienced a fall in their purchasing power over recent months. As of writing, the combined purchasing power of these stablecoins was about $125.9 billion, with a noticeable downward trend evident in the chart.

At press time, this figure was over 21% lower than what it was during the same period in 2022. However, it remained over 100% higher than its levels in 2021.

Source: Santiment

Stablecoins are typically the preferred option for cryptocurrency investors, as they provide a means to transition from volatile coins, such as Bitcoin, to a more stable asset. However, a decrease in the market capitalization of stablecoins could reduce liquidity.

It could also impede the upward momentum of other cryptocurrency assets. Conversely, an increase in the market capitalization of stablecoins may increase the likelihood of a positive trend for Bitcoin.

Santiment’s chart also revealed that the stablecoin buying power decline has slowed over the past week. The pause could be attributed to the slight volatility that Bitcoin and the wider cryptocurrency market experienced during this period.

USDT faced persistent FUD over the years, particularly with regulatory concerns and the transparency of its reserves. More recently, BUSD encountered a regulatory obstacle