Stablecoin Market Cap Decreases, But Whales Remain Unfazed: Santiment

Cardano Uncertain Path

Cardano Uncertain Path

According to data from leading crypto analytics firm Santiment, a distinct trend has unfolded in the stablecoin sphere. Even as stablecoins designed to maintain parity with a reserve asset like the US dollar, continue to hold their $1 peg, the combined market capitalization of the top five stablecoins – Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI), and TrueUSD (TUSD) – has been experiencing a consistent decrease.

Santiment reports earlier today that this downtrend began about 15 months ago, following a peak in March 2022. According to Santiment, Stablecoin market capitalization serves as a reliable indicator of the overall health of the crypto market.

An upswing in the market cap signifies an increased buying power to purchase Bitcoin or altcoins in the future, often hinting at a potential market recovery. Conversely, a declining market cap could indicate that Bitcoin and altcoins are being liquidated, suggesting that large holders have been banking profits.

Sharks And Whales Remain Unshaken

Among the stablecoin ecosystems, large holders, colloquially known as ‘whales’ or ‘sharks,’ represent an interesting variable. These entities, which typically hold between $100,000 and $10 million in assets, play a crucial role in market dynamics.

Despite the decreasing market cap, Santiment’s analysis reveals that these whales are far from unnerved. Specifically, the analytics firm reports that sharks and whales holding Tether, USD Coin, and Dai currently command over 40%, 37%, and just under 40% of the respective supplies.

These holdings are the highest they’ve been since November 2021 or February 2023, suggesting that these whales are merely holding their wealth in stablecoin form, biding their time for an opportune moment to jump back into other more volatile assets.

Steady Accumulation Amid Dormant Stablecoin Movements

While the collective stablecoin market cap has been dropping, Santiment notes a steady accumulation of assets among whales. This pattern lacks any sudden major moves, which might otherwise signify a potential market bottom in a declining environment.

The recent weeks have also seen minimal movement among dormant stablecoins, which could have suggested major buys of Bitcoin or altcoins. Although USD Coin has shown some promising dormant movement at the end of May, the activity falls short of the dormant stablecoins surge witnessed in mid-March, which ignited a notable bull rally.

Meanwhile, according to data from DeFillama, the total stablecoin market capitalization currently stands above $120 billion, down by nearly 1% in the past 7 days. Notably, out of all the stablecoins, Tether’s USDT holds the most dominance at 64.57%.

The stablecoin currently has a market capitalization above $80 billion while Circle’s USDC Coin ranks second in the stablecoin market with a market cap of $28.7 billion. It is worth noting that as the stablecoin market has decreased steadily, larger crypto assets such as Bitcoin and Ethereum may be benefitting from this metric.

Over the past 24 hours, both Bitcoin and Ethereum have shown an uptick up by nearly 1% respectively. This uptrend comes despite the regulatory scrutiny in crypto which has recently affected the world’s largest crypto exchanges, Binance and Coinbase.

Bitcoin (BTC)’s price moving sideways on the 4-hour chart. Source: BTC/USD on TradingView.com

Featured image from Unsplash, Chart from TradingView

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