- Stablecoins on the Ethereum network just hit a new historic high, in line with global stablecoin count
- Assessing incoming regulatory headwinds and potential impact liquidity will be key
The global stablecoin marketcap just hit a new all-time high, with Ethereum enjoying the lion’s share of that growth too. However, what does this mean for the network in terms of liquidity and growth?
The total stablecoin marketcap stood at $205.79 billion, at the time of writing, with most of it in Ethereum. According to DeFiLlama, Ethereum’s stablecoin marketcap amounted to $117.39 billion at press time. In fact, this seemed to be equivalent to 54.32% of the total marketcap.
Source: DeFiLlama
These figures for Ethereum’s stablecoin marketcap marked a new ATH for the network. It surpassed its previous ATH achieved in February 2022, courtesy of the robust stablecoin inflows over the last 2 months.
While the new Ethereum stablecoin marketcap performance has aided in boosting its stablecoin dominance, it also underscores its growing liquidity. This should technically mean more investor confidence and potentially signal budding network growth.
However, Ethereum’s total value locked failed to follow through.
Source: DeFiLlama
Can Ethereum sustain the healthy growth?
Although Ethereum’s stablecoin marketcap is on a positive trajectory right now, its TVL has been declining for a while. This has been largely due to ETH price fluctuations, but this trend could be exacerbated by a recent IRS development too.
According to the U.S revenue authority IRS, tax on staking rewards will be based on unrealized profits. The potential implication is that this could discourage investors from staking their cryptocurrencies – An outcome that could potentially trigger TVL outflows.
There is already a lawsuit challenging the IRS’s position on the matter. Prospects of TVL outflows were not the only concern arising from these regulatory hurdles. There has been a surge in USDT-related FUD in the last 24 hours. This, due to concerns about USDT potentially being delisted in the U.K due to non-compliance.
This development could potentially trigger massive USDT outflows, especially in lieu of the fact that the UK is one of the largest global markets. Meanwhile, USDT is the most dominant stablecoin on the Ethereum network at 64.63%.
USDT delisting on European exchanges could thus have a significant impact on Ethereum’s stablecoin growth. However, the potential impact on ETH remains unknown for now. This, because stablecoin outflows will diminish organic activity but on the other hand, stablecoin holders could potentially use ETH as a safe haven.
The current stablecoin concerns in the UK are likely only short-term headwinds though. Regulatory clarity should clear things up and set the market up for long-term recovery.
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