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Stablecoin Assets Shrink Amid Terra Collapse

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Related Fitch Ratings Content: Stablecoin Dashboard: 1Q22

Fitch Ratings-London-07 June 2022: Global stablecoin assets posted their first sustained and substantial decline following the de-pegging of TerraUSD, the fourth-largest stablecoin by market capitalisation as at end-1Q22, Fitch Ratings says in its latest stablecoin dashboard. The market grew by 15% in the first quarter of the year to USD188 billion, only to reverse those gains following the TerraUSD event on 11 May. Fitch estimates stablecoin assets were USD162 billion as at 30 May.

Stablecoin reserve portfolios are generally becoming more conservative. However, the events surrounding TerraUSD highlight certain sensitivities. Stablecoins reserves are generally managed to preserve capital value, provide liquidity and minimise exposure to market risks. However, limited regulation means there are various strategies for achieving this objective, with different levels of risk.

Fitch expects to see increasing conservatism in the portfolios, with some adopting a similar risk profile to regulated money market funds. USDC has said that, as of end-May, 76% of its reserve portfolio was held in short-duration US Treasuries, with the remainder in cash.

The eight largest stablecoins had an aggregated market capitalisation of USD154 billion at 30 May 2022 and accounted for around 96% of the total market, according to MarketCoinCap. The number of stablecoins had increased to 100 from 75 at end-1Q22. New stablecoins are entering the market, with aggressive offers and large capitalisations.

The ‘Stablecoin Dashboard: 1Q22’ is available at www.fitchratings.com or by clicking the link above.

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