Despite Bitcoin’s remarkable 157% rise in 2023 and near-ideal setup for 2024, the crypto market has been struggling with low liquidity since last year.
The market value of stablecoins is growing again, which is a positive sign for the liquidity of the crypto market, but it has not yet fully recovered and could face regulatory challenges this year, according to JPMorgan.
Stablecoins grew by $60 billion between their peak in May 2022 and their low in October 2023, hitting $122 billion. The spike occurred right before the collapse of the Terra network, which spawned contagion that spread to other stablecoins and cryptocurrencies last year. But as investors anticipated the Securities and Exchange Commission’s approval of cash bitcoin ETFs in the United States, the market expanded by $9 billion between October 2023 and January 2024. This is generally a “positive sign” for the crypto world, according to JPMorgan analyst Nikolaos Panigirtzoglou.
Stablecoins are cryptocurrencies whose value is pegged to an underlying asset. This is usually a fiat currency, usually the US dollar, although there are stablecoins pegged to commodities or other financial assets.
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Despite bitcoin’s remarkable 157% rise in 2023 and near-ideal setup for 2024, the crypto market has been struggling with low liquidity since last year. It all started with a regulatory crackdown on stablecoins, which began with Binance USD (BUSD) last February. A month later, USD Coin (USDC) was caught up in the Silicon Valley Bank panic and briefly lost its parity with the US dollar after its issuer, Circle, said it had $3.3 billion of its reserve of cash at the SVB.
However, Panigirtzaoglou stated that stablecoins still face regulatory risks. In the United States, a key bill on stablecoins is awaiting approval in Congress, while in Europe, the Partial Implementation of the Regulation of Markets in Crypto-Assets (also known as MiCA) is expected to become law this year.
Tether (USDT), the largest and most popular stablecoin, has also been widely criticized for its lack of transparency on the currency’s coverage. Its market capitalization has grown nearly 5% since August}, according to CryptoQuant, benefiting in part from turmoil at rivals USDC and BUSD.
USDC, whose issuer confidentially filed for an IPO last month, could benefit from a future crackdown.
USDC’s market capitalization has grown by approximately 8% since August.
Original article published on Money.it Italy 2024-02-11 07:10:00. Original title: Le sfide che attendono stablecoin secondo JPMorgan
