The overall cryptocurrency market has been quite unpleasant as major crypto assets have seen prolonged negative trends, fueling uncertainty within the sector. With the recent rise in stablecoin dominance, which is seen as a negative sign for cryptocurrenciesthe broader ecosystem may be poised to adopt even more pessimistic behavior.
Growing Stablecoin Dominance Poses Risk to Cryptocurrencies
Recent reports from Alpharctal, an advanced investment data analytics platform, show that stablecoin dominance is rapidly increasing due to price fluctuations. Historically, a decline Stablecoin Domination is a bullish indication for cryptocurrencies, as observed from late 2022 to early 2024, while an increase in dominance is a sure signal of a bearish trend.
As market volatility persists, investors appear to be increasingly turning to stablecoins, hoping to escape the uncertainty affecting larger assets like Ethereum and Bitcoin. This change implies that institutional and retail investors are losing confidence in the current market situation.
According to the platform, the overall market capitalization of stablecoins is currently over $170 million, which represents 8.62% of the entire cryptocurrency market with Tether (USDT) leading with $118 billion, which represents about 69.6% of the entire stablecoin market.
In the absence of USDT and USDC coins, Alphractal noted that the total market capitalization of stablecoins will decrease significantly. The decline shows that the constant issuance of these two major coins, especially USDT on the The TRON blockchain, has been the main driver of stablecoin market growth over the past two years.
Additionally, the platform highlighted that the stablecoin market’s 30-day growth rate is another notable factor to watch. While an increase in this aspect often indicates a long-term bullish trend, a decline has historically had a negative impact on the cryptocurrency market, drawing attention to a previous incident in 2021.
Alphractal mentioned that in 2021, stable coins saw a substantial rise, followed by a decline, signaling the start of the cryptocurrency bear market. Meanwhile, in 2024, two similar but less significant spikes occurred, which could explain Bitcoin’s long sideways trend since the beginning of the year.
With the market declining, the platform believes that stablecoins are directly affecting liquidity and prices are worth studying, and understanding their fluctuations can help with risk management and provide clear indications of trends.
Social Media Market Sentiment Is Bearish
Alpharactal also revealed in another research a worrying trend in the market on social media platforms and news. According to the platform, trader sentiment and technical indicators on the cryptocurrency market is currently neutral, indicating balance or uncertainty.
However, the average sentiment in the media and on Platform X (formerly Twitter) remains bearish. This decline implies growing pessimism among enthusiasts as conversations about the market have been steadily declining on social media platforms.
Featured image from Unsplash, chart from Tradingview.com
