Stablecoins are having a downturn, yet the algorithmic stablecoin market has been hit harder by the collapse of TerraUSD last year. Even in the aftermath, algorithmic stablecoins have continued to struggle.
A recent report from CryptoCompare highlighted the situation of algorithmic stablecoins and the stablecoin market.
According to the report, the market capitalization of algorithmic stablecoins is currently at $2.33 billion, representing a market share of 1.71%.
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This is a significant drop from the all-time high of 12.4% in April 2022, with TerraUSD accounting for 79.8% of the market share.
The report notes that January marked the tenth consecutive month of decline in market capitalization. In December 2022, centralized exchanges saw a net outflow of $3.65 billion in stablecoins, the largest since November 2021.
Additionally, the report also notes that on December 8, Coinbase announced the launch of zero-fee trades for swapping Tether (USDT) for USD Coin (USDC). This marked a significant move in the ongoing "Second Great Stablecoin War."
The exchange, which co-founded USDC in partnership with Circle, cited stability and trust as the main drivers for its support of the stablecoin. Despite this, USDC currently accounts for less than 1% of stablecoin trading volume on Coinbase.
The move highlights the ongoing trend of exchanges showing a preference for certain stablecoins and encouraging, or even forcing, users to switch to their preferred option.
Despite these setbacks, the industry is still searching for a more sustainable and capital-efficient algorithmic stablecoin design.