Cryptocurrencies have been going through a very delicate phase in recent months: especially smaller ones like Gemini’s USD-backed stablecoin GUSD are struggling to emerge in a highly competitive environment, with decreases in on-chain trading volumes and a reduction in their market presence.
To be noted in particular that while Tether (USDT) strengthens its dominance in the cryptographic markets, Gemini’s stablecoin records a terrible performance, with a 93% drop in its market capitalization since July 2023.
The peg with the dollar is still safe, but the use of crypto is gradually diminishing, as evidence that this sector is becoming more and more centralized around a few, but giant players.
What awaits us in 2024?
Let’s see all the details below.
Crypto: the stablecoin GUSD, supported by Gemini, sees more than 90% of its market capitalization evaporate in 6 months
Not all stablecoins in the crypto market have had a stable growth path in recent times: for example in the midst of the price turbulence of 2023, Gemini’s USD-backed cryptocurrency (GUSD) experienced a significant decrease in its usage among traders.
Until June 2023, GUSD was the ninth largest stablecoin in this sector, with a market capitalization of $564 million, but now it ranks 28th against its competitors.
What was thought to be a solid currency, belonging to a respected ecosystem supported by billionaire brothers Winklevoss, is turning out to be a total flop.
In just 6 months, this stablecoin has seen about 93% of its market capitalization evaporate, currently reaching a value of $38.93 million.
In a even broader horizon, Gemini’s currency ranks 667th out of 12,000 cryptographic assets listed on Coingecko, with the largest markets where it is traded being Coinbase, Uniswap, and of course its own exchange.
To give an idea of how irrelevant GUSD has become in the crypto market, Gemini’s stablecoin now represents only 0.0423% of the massive market capitalization of USDT, which is $92.10 billion.
It is worth noting that GUSD is only available on the Ethereum blockchain, while USDT and other competing coins are available in a multichain version, therefore they have more use cases and more growth opportunities.
The collapse of Gemini’s crypto is not due to a decoupling from its anchoring to the dollar, as happened in mid-2022 with the crash of Terra (UST)‘s stablecoin, which within a few days had lost a large part of its value and was traded below 10 cents per unit.
In this case, the decrease is solely due to the reduction of its supply in the market, with many users redeeming the currency by reclaiming what they had locked to mint it.
This indicates a situation of low utilization and lack of confidence from investors, who prefer to keep their liquidity in alternative, safer and capitalized means.
GUSD is not the only stablecoin to have gone through a rather difficult period: in February of last year, the SEC had forced Paxos to stop its BUSD (Binance stablecoin) issuance process, initiating a redemption process for its entire supply.
From that moment on, BUSD lost about 15 billion dollars in market capitalization, even being removed in November from all Binance trading pairs
The performance of the rest of the stablecoin market: the performance of USDT, USDC, USDP and MIM
Unfortunately, the stablecoin market is a fierce and constantly evolving world, where only a few manage to survive: the case of Gemini’s GUSD crypto and its contraction in market capitalization is a clear example of how all the notoriety gained over the years can be lost in an instant.
Among the stablecoins that have managed to survive, even increasing their presence in the market, we see Tether (USDT) in the spotlight, which has added $25.5 billion to its market capitalization throughout 2023.
In particular, in May of last year, while the prices of major cryptocurrencies were declining and other stablecoins were going through difficult times, USDT reached a new all-time high in terms of its circulating supply.
To note how from 2017 onwards, for the Tether currency there have only been growth phases, with the only instances of weakness recorded in May and June 2022, in the midst of the Terra/Luna chaos.
Another stablecoin that has survived the market’s turmoil is USDC: it currently has a market capitalization of about 25 billion dollars and is recognized as the most widely used dollar-pegged cryptographic asset in the DeFi sector.
Most yield, lending, or DEX protocols actually integrate USDC into their pools, with levels of liquidity and trading volumes usually higher than other cryptocurrencies.
Despite this, USDC was not able to grow like USDT in 2023, and in fact, it also lost a significant portion of its market capitalization, about 18 billion dollars.
The reason for this situation in which the two top currencies of the stablecoin market behave in completely different ways lies in the use that is made of these resources.
For USDT, its growth is mainly due to the increase in off-shore trading, where it is extensively used, while for USDC, its decline is mainly caused by the exit of many investors from the stablecoin market, who have preferred to embrace safer and more profitable investment solutions (such as the bond market, for example).
In the midst of the stablecoin sector’s evolution, we find space to mention two other cases of failure that until a few months ago could boast a decent power but today have completely changed outlook.
The Pax Dollar (USDP) currency, for example, had a market valuation of one billion dollars at the end of June, while now it has a value of only 369 million dollars.
Despite this decline, USDP maintains its position as the ninth largest stablecoin by market valuation, although it ranked as the seventh largest in June 2023.
Even Magic Internet Money (MIM), created by the Abracadabra Money project, has a very interesting history behind it: in January 2022, it was one of the most widely used stablecoins in various DeFi applications with a total market capitalization of 4.6 billion dollars.
From being the sixth largest stable in the industry, it has now dropped to rank #23 with a decrease in its market capitalization to just 50 million dollars.