The crypto market crash hasn’t just resulted in the near wiping off of billions of dollars in the market, but it has also resulted in the stablecoin crash. Within the stablecoin crash, however, it’s the small cap stablecoins that have been affected the most. Before we explore this phenomenon, let’s first do a quick recap of what stablecoins are?
As an example stablecoins are simply crypto assets that make an attempt to peg the overall market value to an external reference, such as the ‘dollar’.
An interesting point about Stablecoins is that they are less volatile when compared with other crypto assets. In Fact there was a time when the industry experts said that stable coins could be actually used as a medium of exchange due to their relatively lesser volatility.
In essence, stablecoins pegging is not restricted to the dollar alone. They can also be pegged to a commodity or gold. They also maintain stability through algorithmic formulas which control supply.
If the statistics from the Blockchain Council is to be believed, there are approximately 200 varieties of stablecoins world over. Historically, the largest stablecoins as per market value are Tether, USD coin and Binance USD.
Small Cap Stablecoin’s Decline: A Low Down
Let’s quickly examine the trend of small cap stablecoin being negatively impacted by the crypto market crash.
One of the key reasons why these coins plummeted was that there was a depeg witnessed by Terra (LUNA)’s decentralised stablecoin UST. In fact this placed the entire market into doldrums. At the time of writing UST is down 17.5% to USD 0.4.
Within the realm of stablecoins, it’s the algorithmic stablecoins that were hit the most. For one, Neutrino USD (USDN), a stablecoin belonging to the Waves blockchain ecosystem, has been far away from its original peg, post the crash.. The coin is currently trading at USD 0.77, which was down by 17.6%
Likewise, sUSD (SUSD), a synthetic stablecoin asset on Synthetix (SNX), considerably lost its value. This stablecoin has a circulating supply of over USD 110m.
Read About: SNX: Bringing new assets to blockchain
Further, there have been wild fluctuations in stable coins backed by fiat currencies as well.BiLira (TRYB), a stablecoin backed by the Turkish Lira and Zasset zUSD (ZUSD), a programmable dollar-backed stablecoin too have plunged headlong during the time of the crypto market crash.
That’s not all: besides small-cap stablecoins, tether (USDT), the stablecoin with a circulating supply of over USD 82.7bn, had also distanced itself, albeit slightly from its intended USD 1 peg what with investors redeeming USDT tokens to fiat currency at a rate that was truly unprecedented. However, Tether did regain its peg slightly afterwards though.
Final Thoughts
Amidst the fall of small cap stablecoins, there is a general fear looming in the horizon. Some Twitter users are now speculating that there could be a collapse of Tether as well. The wiping off of billions of dollars from the market as a result of the crypto market crash has invoked investor anxiety.
However, experts say that this is just a transitory phenomenon and that the markets will bounce back.
So, all that you now have to do is start trading with ZebPay, India’s oldest and most secure crypto exchange that offers you a seamless trading experience.
