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### Bitcoin Slump Extends to Stablecoins

The late summer slump in the cryptocurrency market isn’t limited to just Bitcoin. Stablecoins, cryptocurrencies that are typically pegged to real-world assets like the U.S. dollar, are also experiencing a significant decline. In fact, stablecoins are suffering more than most other digital currencies, with their market capitalization reaching its lowest point in over two years.

The subdued trading volumes and a weaker dollar have weighed heavily on the stablecoin market. According to research firm CCData, the market cap of the stablecoin sector is set to decline for the 18th consecutive month. It has already shrunk by almost a tenth this year, standing at $124.4 billion as of September 14.

The decline in stablecoins can be partially attributed to the appetite for the U.S. dollar. James Butterfill, head of research at CoinShares, explained that stablecoins, which are predominantly dollar-denominated, are influenced by the demand for the dollar. A significant rise in stablecoin volumes last year was accompanied by a jump in the dollar index due to interest rate hikes.

Nevertheless, not all stablecoins are facing the same fate. Tether, the largest stablecoin, has managed to defy the losing trend. It reached an all-time high of $83.8 billion in July, indicating its popularity in certain parts of the world, particularly in emerging markets like Central and South America and Central Asia. Paolo Ardoino, the chief technology officer of Tether, emphasized the stickiness of the coin among its users in these regions.

While stablecoins represent only a fraction of the $1 trillion crypto market, they play a crucial role for traders. They provide a means to hedge against price spikes in other tokens like Bitcoin, or to store idle cash without converting it back into fiat currency. Some enthusiasts even envision stablecoins being used as a form of payment.

However, the stablecoin market has had its share of setbacks. The collapse of TerraUSD, an algorithmic stablecoin, marked the beginning of a series of failures for the industry. Binance’s dollar-linked token BUSD has also suffered significant losses, falling by about 89% from its all-time high in November. The New York Department of Financial Services ordered the issuer Paxos to stop minting BUSD, which was once the third-largest stablecoin. Although Paxos continues to support BUSD, Binance is encouraging its users to trade their balances for other stablecoins.

Another prominent stablecoin, USD Coin (USDC), has seen its market cap slide by over 53% since its all-time high in June last year. Both Tether and USDC lost their pegs to the U.S. dollar at different points in 2022.

The failure of certain banks, including Silicon Valley Bank, where Circle Internet Financial held a significant amount of its cash reserves, has caused uncertainty in the market. Dante Disparte, chief strategy officer and head of global policy at Circle, acknowledged that there has been temporary de-risking from the U.S. However, he believes that corrections will occur in the market as the effects of the banking crisis subside.

In this challenging environment, AI legalese decoder can play a significant role in the stablecoin industry. It can help market participants navigate the complex regulatory landscape and provide greater transparency and clarity. By decoding legal jargon, the AI legalese decoder enables users to understand and comply with regulations more effectively, reducing risks and promoting stability in the stablecoin market.

*Reporting by Hannah Lang in Washington; Editing by Michelle Price and Pravin Char*

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