In July, the cryptocurrency markets bounced back and stabilized compared to previous months. Analysts had projected the market could collapse completely.
However, this was not the case. Meanwhile, there is now a sizeable amount of stablecoins ready to re-enter markets anytime.
This is because, during the crypto market decline, most crypto investors converted their holdings to stablecoins. According to the market cap, three of the top ten digital currencies are stablecoins.
CoinMarketCap reveals that their combined worth is currently at about $138 billion. Tether’s USDT is the largest stablecoin with a market cap of $66 billion. The second stablecoin is Circle’s USDC with a market cap of $54.4 billion, and Binance’s BUSD with $17.8 billion.
CZ Believes Huge Funds Would Soon Enter The Crypto Market
On the 31st of July, Changpeng Zhao, the CEO of Binance, stated that many funds are ready to enter the market once it becomes bullish. He stated that:
“Most people that want to exist the crypto market downturn not hold stablecoins.”
CZ said those that needed to get out of crypto did so by converting their funds into fiat. Afterward, they removed their money from exchanges.
However, this occurred mostly in the middle of June when the crypto market lost more than $400 billion in a single week. Since then, the cryptocurrency markets have largely fluctuated between narrow ranges.
Recently, it witnessed an upswing bringing its total market valuation to over $1.17 trillion. This is an increase of over 33% from its cycle low of about $875 billion.
Furthermore, USDT, USDC, and BUSD represent over twelve percent of the crypto market valuation. Despite the collapse over the previous months due to the declining Tether supply and slight market rise, it is still relatively strong.
High Inflation Has Increased The Demand For Stablecoins
However, the major problem facing the crypto market is inflation. Retail traders do not have enough funds to invest in cryptocurrencies compared to when inflation was low.
For most people, holding stablecoins serves as a buffer against the declining local currency. The recent inflation would only cause them to keep doing so. For this reason, there is a higher demand for stablecoins.
The entire market valuation slightly declined on Monday morning after a weekend of stabilization. As of the time of writing, the market is down by 1.2% totaling $1.13 trillion.
As per CoinGecko, ETH dropped by 0.6% to $1,697, while BTC dipped by 1.7% to trade at $23,343. Today, digital currencies are generally losing value, with a handful witnessing double-digit percentage losses.