In its latest weekly report, on-chain analysis company Glassnode examined the inflows and outflows of capital in the cryptocurrency market to gauge recent market activity.
To assess these capital flows, the company looked at changes in the valuation of three types of assets: Bitcoin (BTC), Ethereum (ETH), and stablecoins, as these three make up a significant portion of the digital asset market.
Here’s a chart displaying the data for these network flows over the past few years:
As shown in the chart above, the net flows of stablecoins turned negative since April 2022, indicating that capital has been consistently leaving this space. Both Bitcoin and Ethereum initially saw capital outflows during this period until 2023 when they shifted to net inflows.
However, more recently, both of these assets have approached neutral or negative net flows, implying that capital is once again exiting the entire cryptocurrency sector. This could suggest that there is currently less interest in investing in this space.
In total, stablecoins have decreased by $43 billion, representing a significant 26% decline during this period. The total market capitalization of stablecoins has now fallen to only $120 billion, as highlighted in the chart below.
To explain this situation, Glassnode analyzed:
“This may be attributed to capital withdrawals due to market price conditions but also reflects the opportunity cost of higher interest rates, capital not being transferred into unprofitable stablecoins.”
While the entire stablecoin sector has continued to decline in recent times, Glassnode’s analysis also shows that not all stablecoins have been affected equally.
From the chart, it can be observed that Tether (USDT) saw a sharp decrease from April 2022 until the collapse of FTX, while USD Coin (USDC) experienced a gradual decline. BUSD, however, did not decrease during this period.
However, since the low point of FTX, USDT has turned the situation around and witnessed an increase in its supply by $13.3 billion. In contrast, both USDC and BUSD saw significant reductions of $16.7 billion and $20.4 billion, respectively.
Back in June, Tether’s dominance had hit a low of 44%, but due to these changing flows, the market share of the number one stablecoin has significantly risen to 69%.